Research

14 Pages 3404 Words

1.0 Introduction
1.1 Background
1.1.1 General Discussion

“The development of the motor vehicle industry in Australia had been the result of government intervention and directives rather than entrepreneurial skills applied in a free market” (www.ibisworld.com.au). The industry was characterised by a large amount of assistance such as the protectionist policies which began in 1902, five years after the first car was built. There were high tariff levels of 57.5 percent as well as import quotas of 20 percent (………………).

The federal government decided that it wanted a complete car manufactured in Australia so in 1944, this challenge was taken up by General Motors, Holden Limited. Twenty years after, the government made an announcement about the Australian made vehicle (www.ibisworld.com.au).

In 1985, there was another policy adopted by the Australian car industry. It was known as the Button Plan and the main objective of the plan was to reduce the number of manufacturers from five to three and to expose the industry to more competition by phasing down import tariffs (www.ibisworld.com.au). In 1996, there was a reduction of tariffs to 25.0 percent (www.ibisworld.com.au).

In 1976, there were two new manufacturers in the motor vehicle industry of Australia. They were AMI Toyota and Nissan. Due to their entry into the market, production costs increased. In 1984 and 1985, the production sector recorded profits on the domestic Profitability on Passenger motor vehicle (PMV). However, in 1986, there were significant losses and downfall in the domestic market for PMVs (www.ibisworld.com.au). Ford and Mitsubishi recorded profits, while Holden and AMI Toyota had a big loss. The motor vehicle sector itself made a loss of $224 million in 1990 (www.ibisworld.com.au).

Although sales declined in 1986 and 1987, investment expenditure continued to increase till 1988 when the level of investment fell due to the completion of the...