The future of Australian auto industry looks grim. Two main factors affecting the industry are high cost and poor subsidy. With Hyundai recalling every ix35 car, manufactured over last three years for faulty airbag and steering wheel, the situations could even get worse.
Before we discuss the implications of Hyundai’s recall of ix35, we need to have an overview of the problems that the auto industry is facing.
Auto purchasers in Australia are confused. Auto manufacturing companies are justifying the high price by saying it is necessary to keep the auto assembly plants or otherwise those plants will slowly recede from view. But how long could they play this victim card? In Ontario, Canada, General Motors and Chrysler Group LLC received $13 billion from the government, which was a rescue package to shed off the effects of recession. But they’ve applied for subsidy again and federal and Ontario governments are now considering it.
An average Australian doesn’t know whether the automotive industry really needs subsidy. Those who are not the advocates of subsidy argue government doles couldn’t help a business stand out amid competition. The auto industry is uber competitive, so subsidies can’t help it in the long run. The Australian automotive industry is indeed competitive. In 2013, the awards for best light car, best small car, best medium car, best large car, people’s mover, all terrain 4WD, best sports car and best SUV were received by companies like Ford, Land Rover, Hyundai, Volkswagen, Renault, Lexus, Audi and BMW.
In such a competitive backdrop, the companies are improving the quality of their products and introducing new brands. If quality is being improved, the export will increase. An analyst called Joe Hockey remarked “You’ve got the American market right on your doorstep.” He didn’t forget to mention however that high operational cost is a bottleneck for Australian auto industry. So keeping the production cost under control is essential. But that might result in compromise with the quality. It is therefore, like a vicious circle.
If companies don’t get subsidies and continue to face challenges of improvement, problem of high cost on the part of consumers and rising production cost on the part of manufacturer will remain. The latest case of Hyundai is a prime example. The South Korean company has recalled more than 32000 vehicles because of “an incorrectly tightened bolt could result in the misalignment of the airbag module, possibly affecting its deployment, and could also affect the operation of the horn.” Australia can’t send cars with such quality to US, can it?
Hockey’s vision could only realize if government finds a way to help companies without spending too much on subsidies. We’ll look forward to a solution.