Question

Driving the Green Car Market in Australia
High fuel cost and concern over climate change are just two factors that have caused Australia’s once booming automotive industry to stall in recent years. Although car exports stood at a respectable $5.2 billion in 2008, making it one of the country’s top ten export earners ahead of more traditional export such as wine, wheat, and wool, there has been a significant change in consumer preferences. While the market was once dominated by demand for large passenger cars, consumer both domestically and abroad now want smaller cars with lower fuel consumption.
As well as demand for change from car buyers, the industry has also been facing the double whammy of pressure on cost from within. Longstanding plan to cut trade tariff and quotas that had protected the industry since 1985have been causing alarm about what the future might hold because there is now even less incentive to build cars locally. Although the automotive industry around the world has been suffering in the deep financial downturn of the time, any further pressure on Australian car manufacturing would undoubtedly have a devastating effect. Australian carmakers build about 320 000 vehicles a year and employ 65 000 people. Many others are also engaged in associated industries that benefit from the large market.
When Mitsubishi closed the last of its manufacturing plants in 2008, leaving just three automakers operating in the country (local subsidiaries of Ford, Toyota and General Motor), the government could see it was time to act. To add a sense of urgency, Ford Australia announced plans to cut 450 jobs, as industry figures showed car sales down 11 percent from the year before.
The solution was a proposal to spend $3.4 billion between 2011 and 2020 on a fund to transform the Australian Automotive industry into the green car market. The intention is to use the fund to help the manufacturers still involved in that country with the costs of developing new technologies for alternative energy vehicles and encourage them to make any existing environmentally friendly models in Australia.
The initiative caught the attention of Japanese car giant Toyota, which is one of the many international automakers racing to offer more fuel-efficient models in the wake of fuel prices racing to offer more fuel-efficient models in the wake of fuel prices hitting record high around the world as well as increased environmental concerns. Toyota’s business plan is to reach a target of selling 1 million hybrid cars by the early part of the next decade, and to accomplish this goal, it needs to more than double production of the
vehicles. The Japanese company was already building its Camry Hybrid in Japan, as well as in Kentucky in the United States and in a joint venture factory in China. In 2008, thanks in part to the strength of the Australian Dollar; it had been weighing an alternative plan to import engines to Australia from its Kamigo plant in Japan.
In September 2010, after month of discussion, Toyota announced a $300 million upgrade of its plant in western Melbourne. Under the investment, which has been partly funded by taxpayers through a $63 million payment from the Green Car Innovation Fund, as well as an injection of cash from the local Victorian administration, the Altona engine plant was aiming to produce 100,000 hybrid engines and four-cylinder new generation engines each year from the second half of 2012. The plan was that the Australian-made engines would be exported

into other countries that manufacture Toyota’s Camry and Hybrid Camry. Toyota’s more environmentally sustainable engine will consume 4.5 percent less fuel and 5 percent fewer greenhouse gas emission than current equivalent. The Australian government claimed that the initiative would secure as many as 3,300 jobs, including existing direct and indirect jobs, and would anchor Toyota’s operation in the country for years to come. According to Toyota executives, the support provided by the Green Car Innovation Fund was the major factor in the project going ahead when they weighed it against other alternatives, including transferring production to the home market in Japan.
REQUIRED:
QUESTIONS
1. Based on case study above, should Australia’s government intervene in Foreign Direct Investment? Provide your justification with example.

2. As Australia’s strategic officer, provide suggestion (s) on strategy to attract more car automakers to invest in your country.

3. Toyota has decided to manufacture in Australia rather than in its domestic factories. Justify the action whether if it is a strategic move and discuss the significant impact of this decision towards Toyota’s image and reputation in its host country.
( 8 marks)
4. Based on your understanding, explain the reason (s) for Australian Government to implement trade tariff and quotas on all imported automobiles.

Answer 1

Answer 1) As Australian government has started a green revolution and has stated a initiative of Green Car Innovation Fund which is helping companies financially to start their manufacturing locally in Australia. So keeping all these things in mind Australia should allow foreign companies to invest 100% in their companies without doing a joint venture that is 100% stake in country and Australian government should also provide rebate on taxes and custom duty.

Answer 2) Stratigies that Australian government can form in order to attract car makers

· Lowering Tax rate

· Giving rebates on import of raw materials

· Giving land for factories at a lesser rate

· Helping with legal issues and document issues

· Charging less sales tax of cars sold in Australia

· No Road tax on electric cars that will be sold this will increase demand of electric cars and more revenues will come to car making companies

Answer 3) Well when looking from a strategic move I don’t think this is the best of decision because Australia is very far from countries where Toyota is into trading like UK, Arab countries, India etc. The exporting cost will be very high along with this it will take a lot of time in trading cars from one country to other country and Australia is surrounded by Pacific ocean where it is not safe to travel from ship due to presence of glaciers so only Air travel is possible in such cases the cost of transportation will be very high.

Answer 4) There can be many reasons why Australian government has implemented these tarfis, let us look into them:

· To increase employment

· To reduce cost of cars in Australia

· To shift fuel cars to electric cars as cost of fuel is high

· To bring local manufactures

· To boost the economy

· To increase standard of living of people in India