Australia's Auto Industry Is Dead: Could It Happen Here? Page 2

February 10, 2014

Rusted car, Strezlecki Track, Australia (via Wikimedia)

The situation could become more complicated in the next few years thanks to the Trans-Pacific Partnership between the U.S., Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, and possibly Japan. That could make imported vehicles cheaper, which could, in turn, cause some automakers to shutter their U.S. facilities. 

Thankfully, the U.S. has few tricks up its sleeve. For starters, we have a fairly strict regulatory process for automobiles, which tends to weed out companies that aren't up to snuff. As one of the world's top-two economies, we're also able to make demands of our trade partners, saying, in essence, "Okay, you can have access to U.S. consumers, but only under X conditions and only if we get Y." That can often give U.S. production an edge.

OTHER FACTORS

A few more factors make it unlikely that automakers will scale back their U.S. activities anytime soon. For starters, America boasts a population that's nearly 14 times as big as Australia's, and we are a huge auto market. Furthermore, keeping activities close to the purchaser helps keeps costs down and can boost profits. 

Just as importantly, there are many, many companies developing cars for all those U.S. consumers. That sort of intensive, research-and-development investment helps keep automakers rooted to the spot.

And let's not forget, the U.S. has a robust domestic auto industry. It's one thing for Japanese car company Toyota to pack up and leave Australia. It would be quite another for Ford or Chrysler or General Motors to leave Detroit and head to Brazil or Canada or Mexico.

Bottom line: at the moment, we think it's very, very unlikely that the U.S. auto industry will see many/any companies scale back stateside production anytime soon. It's simply too affordable and profitable to be here right now. But of course, that could easily change someday -- in fact, it probably will. Until then, we should probably just enjoy the ride.  

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