Holden

It’s bad news for “Australian Made” as Holden announced that it will turn the engine off on its car manufacturing in Australia, with the last Aussie-made car to roll off its production line in 2017.

2900 jobs will be lost in South Australia and Victoria as the company’s 65 year history of making cars in this country comes to an end.

Holden cited factors such as a high Australian dollar, costly production and a relatively small domestic market as reasons behind the decision.

Toyota will paint a lonely figure as the only brand to be left producing cars in Australia. Will it withstand the inevitably immense pressure to remain?

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564) and may contain general financial advice that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs.

9 thoughts on "The end of the road?"

  1. Collin Guin
    Australian Car industry is a dead man walking. How much would you invest into a dead body unless you are Invocare LTD investor?

  2. I noticed people have been selling off MMS lately. Does anyone know if there much fundamental reason to explain a decline in value linked to the closure of Holden, or have people just been selling indiscriminately in fear because both business models involve motor vehicles?

    • I think it might be some of the latter but you should do your homework. We have spoken to one senior Federal MP about the link between a local car manufacturing base and the policy around FBT on car leases and we have been told the policy is not dependent on car manufacturing existing in Aus. You may however want to check out and understand all of MMS’s business lines.

  3. A caveat, this is my opinion and I am sure plenty of people will not share my opinion.

    This should have happened many years ago. It is the nature of capitalism – if a business can’t make money, it has no right to be in business or it should go where it can make money. The car industry has similarities with the airline industry as well as the free to air TV industry (per Roger’s perpetual poker game view). Similarities with airlines – it has a lot of excess capacity, it is capital intensive. Similarities with free to air – if one car manufacturer has a popular car, the chips collect there until the next manufacturer has the next popular car.

    In addition, if one manufacturer introduces new technological manufacturing efficiencies or car safety features, you can be sure that soon enough all the other manufacturers will introduce the same technology or safety such that no one wins.

    The government should not be pouring money into businesses with poor economics. What the government should be doing is encouraging continual innovation by pouring the money they spent on propping up poor businesses into innovative businesses. Innovations that the rest of the world hasn’t thought of and yet needs to have.

    Moreover, if we are seen around the world has being the nation for innovation, we will attract more smart people that will in turn innovate more.

    I recently watched a few youtube videos from a physicist named Neil deGrasse Tyson, who made a compelling argument that NASA was an important source of innovation for America and the American government should increase NASA’s funding. Want proof of NASA’s innovations? NASA publishes a book each year of its private industry spin offs http://spinoff.nasa.gov/

    Here is a good video from Neil: http://www.youtube.com/watch?v=wNxnCzz5oQE

  4. From what I here Toyota are in as much trouble…What are your thoughts on the Silver Chef profit guidance?

    Regards Daniel

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