Toyota Motor Corp. (7203) will stop building cars in Australia in 2017, spelling the end of the local industry after Ford Motor Co. (F) and General Motors Co. (GM) announced last year they also plan to pull out.
The Japanese company, which started making cars in the country in 1963, cited high manufacturing costs, an elevated Australian dollar and low economies of scale. Toyota has 2,500 manufacturing employees in the country, it said in an e-mailed statement today.
Toyota’s decision marks the end of an Australian car industry that traces its roots to 1901, as a fall in trade tariffs, the small scale of local plants and an Australian dollar that surged almost 50 percent against the U.S. currency from 2009 to 2012 pushed consumers to cheaper imports. Ford said in May that it would stop output in October 2016, while GM’s Holden unit announced a 2017 departure in December.
“Once Ford and Holden went, it was always going to be hard for the last one to survive,” said Stephen Walters, JPMorgan Chase & Co.’s chief economist in Australia, citing the strength of the currency, small scale of local production and high costs. “There will be spillover effects in terms of employment lost in the car industry itself and related industries.”
Toyota’s manufacturing halt will leave Australia with no consumer carmaker for the first time in peacetime since at least 1925, when Ford established a plant in the southern city of Geelong to assemble Model Ts. The industry, including parts manufacturers who supply the three carmakers, employed 50,370 in February 2013, according to government data.
The Japanese company is Australia’s biggest automotive exporter, sending overseas about 73 percent of the 101,424 cars produced in 2012, according to a November submission to a government inquiry on the future of the industry.
“We did everything that we could to transform our business, but the reality is that there are too many factors beyond our control that make it unviable to build cars in Australia,” Toyota Australia President Max Yasuda said in the statement. “Our manufacturing operations have continued to be loss-making despite our best efforts.”
Tony Abbott’s government, which was elected last September vowing to cut taxes and ease red tape for businesses, has said it doesn’t believe in “corporate welfare” to prop up ailing companies.
It wouldn’t “run down the road after Holden waving a blank check,” Abbott said during the election campaign last August, criticizing A$700 million ($624 million) of extra funding for the industry promised by the government at the time.
Toyota’s decision is “a reflection on a restructuring globally that’s going on,” industry minister Ian Macfarlane told a media event in Canberra today. “The automotive industry has been facing significant challenges in Australia perhaps for over a decade.”
The Aussie fell 0.5 percent to 89.17 U.S. cents as of 7:52 p.m. in Sydney. The currency strengthened 2.3 percent last week, the most since the period ended Sept. 6, to 89.59.
Toyota’s Australian unit is based in Victoria, which lost 12,600 jobs in December, the most of any Australian state in the latest employment data released Jan. 16. In the 12 months to November 2013, Australia lost 29,577 jobs in manufacturing.
The decision is devastating “for thousands of Australian workers and the entire Australian manufacturing industry,” Paul Bastian, the national secretary of the Australian Manufacturing Workers Union, said by e-mail.
Toyota had been attempting to amend its contract with plant workers under plans to cut the cost of producing cars locally by about A$3,800 a vehicle. It had appealed a Dec. 12 decision by Australia’s Federal Court blocking a vote among its workforce on the changes.
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