General Motors, which has been considering its upcoming business in Australia for months, has recently decided to ship more South Korean-made cars to Australia which is for the worldwide reformation that will see its Chevrolet brand in Europe dropped and production in Australia can possibly be scuffled.
Australia’s car market industry has been under compression for many years because of high costs, strong local dollar, weak car exports and tough global opposition. Recently, Ford Motor Co also announced that they would shut down their two Australian auto plants in October 2016, following the exit of Mitsubishi Motors in 2008. So GM is planning to supply cars in Australia using plants in South Korea affected by GM’s announcement on Thursday that it will drop the Chevrolet brand in Europe by the end of 2015.
This move might face a backlash in Australia, where there are extensive distresses about the exit by GM Holden which will be followed by Toyota Motor Co, causing a collapse of the entire industry.
The opposition Senator John Madigan of Australia said that “When GM pulls out of this country, it will be a domino effect,”, whose state of Victoria is the one of the major centers for Australia’s auto industry. He also added that “Already car component manufacturers have lost critical mass with the decision of Ford to move out from Australia. If another one pulls out, that’s the end, then we’re going to be hearing from Toyota which will cause tens of thousands of jobs lost.”
The industry has been propped up by billions of dollars in government support, which has become less certain since Prime Minister Tony Abbott’s conservative coalition won power in September. Adding to this pressure on the industry, Australia on Thursday signed a free trade deal with South Korea, cutting tariffs on imports of cars and car parts.
Last year GM Korea pumped out nearly 4.5 million cars. So you can imagine the size of their supply chain. Richard Reilly, the chief executive of Federation of Automotive Products Manufacturers said that “They are going to be getting better access to our market going forward.”
Ian Park, an analyst at IHS Automotive, said he expected GM Korea to seek to export more cars to Australian car market after Chevy is withdrawn from Europe, boosted by the trade deal.
In a statement GM Korea mentioned that: “The phase-out of Chevrolet in Western and Eastern Europe will rise the focus on driving profitability, managing costs and maximizing sales opportunities in Korea.”
GM Korea exported nearly 187,000 Chevy cars to Europe car market in the previous year but the brand has failed to gain substantial share in the car market. They exported about 30,000 vehicles including Barina/Aveo subcompact and Captiva sport utility vehicles to Australia, where they were sold under the Holden badge.
The decision of GM, to export cars from South Korea also serves to put a little pressure on the Koreans. The costs in Korea are rising. The labor environment is not the friendliest in the world.
