Report: Australia’s Automotive Industry Facing “Massive Challenges”

Report: Australia's Automotive Industry Facing "Massive Challenges" - Steve Bletsos

A new report published by the Motor Trades Association of Australia (MTAA) has revealed Australia’s automotive industry is facing declining business profitability and skill shortages that will “test the resolve of the automotive industry” over the next few years.

‘Directions in Australia’s Automotive Industry – An Industry Report’, prepared by VACC Senior Research Analyst Steve Bletsos, says the Australian automotive industry is facing massive challenges and is at a “revolutionary turning point”.

“This turning point not only encompasses the transition to zero emission vehicles over the next decade, but the integration of electric vehicles as assets within the electricity generation and transmission sector that are capable of not only powering household energy needs, but can stabilise the electricity network in times of peak demand,” the report said. “These unprecedented developments will change the concept of the motor vehicle and potentially the scope of the automotive industry in future.”

The report says these developments will lead to significant structural change, with evidence showing such change is already emerging.

“The experience of Norway, a country well advanced in the path of electric mobility, also shows that the transition to electric vehicles requires significant investment by dealerships and automotive workshops in capital equipment and skills training. Not all automotive workshops will be able to compete in the automotive service and repair market for electric vehicles, with 20 per cent of automotive workshops expected to exit the repair market in Norway by 2030. These findings have significant implications for Australia as it transitions its vehicle fleet to electric.

“All automotive businesses will need to obtain as much information as possible to make an informed decision on the future opportunities and risks associated [with] participating in the ensuing electric vehicle ecosystem.”

The report says that while Australia’s electric vehicle uptake is low, ongoing technological advancements and economies of scale may bring about a quicker than expected price advantage for electric vehicles over internal combustion engine vehicles. This may sway consumers to purchase an electric vehicle sooner than expected. Such a scenario could place automotive businesses in an exposed position.

According to the report, Australia’s automotive industry is also experiencing compositional change and a redistribution of skilled labour.

“There is growing segmentation of the industry into large corporate businesses and sole traders. Evidence suggests skilled technicians are increasingly leaving their employers to set up their own businesses as sole traders. This has left a void for many small and medium size business owners who are struggling to replace the skilled tradespeople.”

The report added that governments have a duty to understand these industry changes, including the impact that electric vehicles will have on Australia’s automotive industry and broader community.

“This would allow for long term planning that oversees the transition of the industry and mitigates any employment and business losses within the community. For this to be successful, there must be an early mutual interaction between government, automotive associations, and other industry stakeholders where industry intelligence is shared, and appropriate policy measures are developed in consultation with affected parties.”

The full report is available to read from the VACC here.