Lack of vision for parts sector ‘scary’: AAAA

THE peak body for the automotive aftermarket industry has accused the federal government of failing to adequately support the parts sector, describing the absence of a definitive plan as “quite scary”.

In an interview with GoAuto on the eve of the biennial Australian Auto Aftermarket Expo, which opens in Melbourne on Thursday (April 16), Australian Automotive Aftermarket Association (AAAA) executive director Stuart Charity said the government had no plans for the car manufacturing industry beyond the end of 2017 – the point when Holden and Toyota will have closed their factories, following Ford’s exit in 2016.

Mr Charity also accused the industry minister Ian Macfarlane of playing charades with the funding of the Automotive Transformation Scheme (ATS).

“There’s no vision for the future of the automotive manufacturing sector and, frankly, that’s quite scary,” he said.

Mr Charity said governments of both persuasions had, for a long time, only considered the car-makers and their direct suppliers as “the automotive industry” and all other makers of automotive components had been excluded from industry plans.

“Not enough people are calling this for what it is,” he said referring to the closure of the three car-makers.

“The Australian economy has very rarely experienced shocks like that it is about to experience: the complete shutdown of a sector of manufacturing which employs huge numbers of Australians and has an enormous skills base.” He described Mr Macfarlane’s decision to drop plans to cut the last $500 million of assistance from the ATS as a charade, arguing that it did not mean the minister was suddenly now helping the ailing sector but was made in the context of its inability to pass the proposed ATS amendment bill in the senate.

Mr Charity said the decision to drop the legislation was designed solely to take the heat out of the senate inquiry into the car industry, which was started by Labor with the help of Senator Ricky Muir.

“He knows very well the ATS provides finance for investment in R&D and new models and that none of the suppliers were developing new models and new technology,” he said. “Investment is in freefall.” In other words, few applications were going to be received for co-investment and little of the $500 million would be disbursed.

“All the support has been targeted only at the car-makers and the direct supply chain, but it is now beyond the pale that, when faced with a crisis of this proportion, we have got a government that, rather than being proactive and listening and talking, is playing political games,” he said.

Mr Charity said the government’s narrow view of the automotive sector ignored many manufacturers that could benefit from R&D and export assistance.

“And not just the automotive aftermarket – it’s truck-building, bus-building, personal motorised vehicles and recreational vehicles like Jayco caravans.

“These are advanced manufacturing industries that have, with the right government policy settings, the potential to expand.

“And we’re not talking about subsidies. We’re talking about promoting investment in R&D, innovation, promoting exports, providing a vision and some infrastructure for those industries to grow and absorb some of the jobs lost.” Mr Charity said that, while there were plenty of success stories in the parts of the automotive sector excluded by the government car industry plans, these companies were still relatively small and would benefit from targeted assistance.

He said one of the principal challenges for aftermarket producers was to design, develop, manufacture and distribute components that meet local and international design specifications.

He said the government should consider establishing an ‘Australian Automotive Aftermarket Lab’, which would help manufacturers recognise and meet international standards for components.

“Compliance with design specifications and compatibility with international passenger motor vehicle systems requires access to the latest vehicles and test equipment,” he said.

“This represents a significant cost and logistics barrier to small, agile and innovative companies.” He said a good example was the problem caused by the advent of electronic stability control programs on cars.

Because state authorities had no knowledge of these systems and no way to test them, they effectively banned the modification of suspensions on vehicles fitted with ESC by simply refusing to approve modifications.

This threatened a large proportion of the revenue generated by aftermarket producers.

Mr Charity said he had asked the affected companies to pool their resources so that the AAAA could arrange for the relevant tests to be done overseas at a cost of more than $300,000.

“Australia also has a significant record in the design, engineering, manufacture and export of performance, racing and motorsport technologies and components,” he said.

“Yet Australian auto industry policy has not embraced this sector.

“We need to better understand how to leverage motorsport into motorsport manufacturing and export.

“We have recommended that government seek to fully understand the breadth and depth of this segment of the automotive industry and we have a vision for the creation of the Australian Motorsport Component Cluster, based on the Silverstone model in the UK.” Mr Charity said the entire aftermarket sector employed 40,000 people and turned over $11 billion a year.

Local manufacturing by aftermarket suppliers represents around 36 per cent of all automotive manufacturing, around $5.2 billion a year. Of that, around $800 million is exported.

“AAAA members provide proof that there is a viable and growing industry in the aftermarket. About 260 AAAA members manufacture locally and 65 per cent of them export some of their output,” he said.

The Australian Auto Aftermarket Expo is again held simultaneously with the Collision Repair Expo and is sponsored by Monroe shock absorbers.

The expo is held every two years and will be staged in the Melbourne Exhibition from April 16-18.

Mr Charity said there would be 420 exhibitors and that he expected around 12,000 people from the automotive sector to attend.

Admission is free for anyone who can prove they work in the automotive sector.