Are Australian Car Industry Subsidies Worth Keeping?

8/14/2019 Are Australian Car Industry Subsidies Worth Keeping?

1/25

Federal Chamber ofAutomotive Industries

The Australian automotiveindustry and a changingcompetitive environment

December 2011


2/25

December 20112PwC

Disclaimer

This report has been prepared by PwC at the request of the Federal Chamber of Automotive Industries (FCAI), according to the terms of our Engagement Contract withFCAI.

The information, statements, statistics and commentary (together the Information) contained in this report havebeen prepared by PwC from publically availablesources. PwC does not express an opinion as to the accuracy or completeness of the information, the assumptions made by the part ies that provided the information orany conclusions reached by those parties. PwC may at its absolute discretion, but without being under any obligation to do so, update, amend or supplement thisdocument. PwC disclaims any and all liability arising from actions taken in response to this report. PwC disclaims any and all liability for any investment or strategicdecisions made as a consequence of information contained in this report. PwC, its employees and any persons associated with t he preparation of the enclosed documentsare in no way responsible for any errors or omissions in the enclosed document resulting from any inaccuracy, mis-description or incompleteness of the informationprovided or from assumptions made or opinions reached by the parties that provided Information.

"PwC" refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwCnetwork. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients.

PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in anyway. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm's professionaljudgment or bind another member firm or PwCIL in any way.

Liability is limited by a Scheme approved under Professional Standards Legislation.

Draft


3/25

December 20113PwC

Executive summary

PwC has been engaged by the Federal Chamber of Automotive Industries (FCAI) to prepare a report informing on the:

current economic profile of the automotive industry within Australia

competitive challenges facing the industry stemming from changing macroeconomic and trade conditions

industry investment policies currently being perused by overseas governments.

Investment attraction current patterns of co-investment

by overseas governments implyvery strong competition for globalautomotive industry investment.This investment is needed toproduce the next generation of lowemission vehicles in Australia.

Sound Fiscal Environment inthe longer term, many of theoverseas governments that havere-established co-investmentprograms will not necessarily havethe fiscal capacity to sustain theseinvestments. This contrasts with

Australia, which has a relativelysound fiscal position.

Increased Competition for InvestmentAttraction as a result of the globaleconomic downturn, overseasgovernments intervened to diversifyand strengthen their manufacturing

base. In comparison, the level ofassistance and co-investment received

by Australian manufacturers isrelatively low.

Exchange Rate as a result of themining boom the $A has appreciatedmarkedly, increasing thecompetitiveness of imported cars in thedomestic market and reducing thecompetitiveness of Australian exportedautomotive products.

Reciprocal Market Access theAustralian Government unilaterallyreduced the general automotive tarifffrom 10% to 5% in 2010, yet other majorautomotive manufacturing nations haveresponded to the economic down-turn

by increasing protective barriers.Moreover, based on current tariff andexcise arrangements, Australias freetrade agreements do not appear to beproviding export market access for

Australian vehicle manufacturers.

The Australian automotive industrycontinues to be a substantialcontributor to the Australianeconomy:

directly employing up to 59,000people in manufacturing

generating broader industry grossvalue add of $23.5 billion per year

(on par with the utilities andhospitality sectors)

exporting automotive vehicles andcomponents worth $3.6 billionduring 2010

investing $5.8 billion in researchand development over the last 10

years.

The challenges facing the Australianautomotive industry arepredominantly externally generated,

arising from the broader economicintegration between Australian andinternational economies:

Access to Finance the longer-termimpact of the global financial crisis(GFC) has been a global reduction inavailable finance forinvestment in automotivemanufacturing.

The strength of the new vehicle marketin Australia masks the challenges facingthe Australian vehicle manufacturingindustry. Australian vehicle productionhas dropped by over 40% since a peakin 2004. The majority of this reductionhas occurred since the global economicdownturn and is as a consequence of:

increased competition (due to tariffreductions and strengthening of theA$) in the Australian domesticmarket resulting in a reduction inlocally produced vehicles from 30%to 15% of the domestic market

weakened consumer confidence andchanges in consumer demand forsmaller, low emission, vehicles.

Going forward, given the globaleconomic environment, it is reasonableto expect that:

New Auto Investment broadmacroeconomic, trade and consumertrends (i.e. the higher $A, expansionof free trade agreements withoutreciprocal market access) willcontinue. These are challenges to

which the Australian automotivemanufacturers will need to respond

with new investment and increasedproductivity.


4/25

December 20114PwC

Table of contents

Industry profile 5

Macroeconomic trends 11

Government support 15

Industry outlook 24


5/25

December 20115PwC

Industry profile:Role in the economy

Automotive manufacturing provides significant economic benefits in terms of employment,value adding, R&D and exporting. The industry is the largest contributor to manufacturingoutput, employment and R&D.

The automotive industry provides employment for high-value design and engineering skills

and builds capability in Australia that has spillover benefits for other industry sectors.

The industry also requires a large and stable workforce that can be located around majoremployment centres.


6/25

December 20116PwC

Economic output

The Global Financial Crisis (GFC) in 2008 re-intensified the debatearound the importance of a diversified economy underpinned by astrong manufacturing base.

The sharp downturn and subsequent weakness in high value add services re-focused attention on labour intensive manufacturing industries, like theautomotive industry. Many governments have responded through increasedinvestment designed to retain and attract automotive manufacturing. Themethods and extent to which this has occurred is discussed in further detailin Section 2 A changing competitive environment.

Industry profile: Role in the economy

Within Australia, the automotive industry represents an estimated 1.92%of total gross domestic product (GDP). This equates to annual industrygross value add of $23.5 billion.

This level of economic output puts the industry on par with the utilities andhospitality sectors. The automotive sectors numerous linkages to otherparts of the economy also ensures a high spill over, or flow through effect ofindustry investment into the broader economy.

Agriculture3%

Mining9%

Utilities2%

Construction8%Trade

9%

Hospitality2%

Transport5%

Media3%

Financial11%

Real estate3%

Professional & Admin9%

Public Admin

5%

Education4%

Health and social6%

Other10%

Manufacturing9%

Car manufacturers0.21%Mechanics0.26%

Retailers1.12%

Parts dealers0.21%

Parts manufacturers0.11%

Automotive1.92%

Source: ABS (2011) Cat. 5206.0; IBIS World Australia Automotive Industry Report Series (2011)

Chart 1: Industry share of GDP FY11


7/25

December 20117PwC

Production and sales

The size of the automotive market has increased by 32% since2000, reflecting an annual growth rate of around 2.8%.

While sales did stall during the GFC, renewed domestic demand in 2010for passenger vehicles and SUVs has seen domestic demand return topre-GFC levels.

There has been a decline in the local production of motor vehicles fromits peak in 2003 and 2004. Key features of this downward trend include:

production for the domestic market contracting at an annual rate ofapproximately 9%

production for the export market growing steadily through to 2008 atan annual rate of approximately 4.7%, but fell away sharply in 09/10.

In 2001, just under 30% of total domestic demand was served bydomestic vehicle production. This figure has halved, with just under15% of total domestic demand served by domestic vehicle production in2010. The implication of declining domestic production set againstincreased domestic demand has been an increase in importation of

vehicles to fill the gap.

This shift is a function of changes to the domestic and internationalcompetitive environment, as well as shifting consumer preference. Theseforces, and both their current and potential impact upon the automotiveindustry within Australia, are discussed in detail in Section 2 Achanging competitive environment.


0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

00 01 02 03 04 05 06 07 08 09 10

Sales(units)

Passenger Light Trucks/ SUVs Heavy Trucks

Chart 2: Motor vehicle sales in Australia

Source: DIISR, Key Automotive Statistics (2010)

Chart 3: Motor vehicle production in Australia

0

50,000

100,000

150,000200,000

250,000

300,000

350,000

400,000

450,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Production(units)

Domestic market Export market



8/25

December 20118PwC

Exports

The export of automotive vehicles and components was worth$3.6 billion dollars during 2010.

This comprised the export of approximately 94,000 vehicles (40% of totaldomestic production), generating export revenues of $2.1 billion, and $1.5

billion in components.

The long term revenue from automotive exports has increased (Chart 4)despite the decline in the units exported (Chart 3, previous page). Thisimplies that the export value per unit exported rose from 2000 through to2008, with total exports exceeding $5 billion due to increasing efficienciesand a favourable currency.

More recently, the stalling of consumer demand for vehicles resultingfrom the GFC and the strength of the $A have led to a reduction in thenumber of vehicles exported (down 55% between 2008 and 2009) and anear halving of their export value.

Australias key export markets include the Middle East (44% of exports),New Zealand (13%) and the countries within the NAFTA bloc (9%). Thecomposition of these top trading partners is important because both theMiddle East and the US were severely affected by the GFC and there was acorresponding decrease in demand for vehicles in these markets.

Furthermore, the recent appreciation of the $A has been most pronouncedagainst the $US (against which many Middle Eastern countries peg theircurrency), implying lower price competitiveness in these markets since theGFC. This point is elaborated upon further in Section 2 A changingcompetitive environment.

0

1

2

3

4

5

6

7

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

ExportValue($billion)

Vehicle Components



Chart 4: Changing value of automotive exports


9/25

December 20119PwC

Employment

Chart 5: Employment within the automotive industry The automotive industry directly employs up to 59,000people in local manufacturing.

The estimates of employment in automotive manufacturing rangefrom 52,000 as reported by IBIS World up to approximately 59,000as reported by the Department of Innovation, Industry, Science andResearch. This employment within manufacturing forms the base ofthe local automotive industry, not only through its job creation, but

wider support for the localised supply chain which includes partsmanufacturers.

Employment within the wider automotive industry has grownsteadily over the past decade. However, this total growth masksdeclining employment in automotive manufacturing which currentlymakes up 14% of employment within the industry, down from 20%in 2002/03. The total industry employment growth is being driven

by automotive servicing, which accounts for an estimated 72% of allpeople employed within the industry.

The overall automotive industry currently employs 372,000 people.This includes the 52,000 people directly employed in manufacturing(IBIS World estimate), 147,000 employed in servicing and 173,000employed in retail/wholesale activities.

This total employment figure of 372,000 in the automotive industry,implies that the industry employs more people than the:

Agricultural sector (336,000) Mining sector (212,000)

Utilities sector (electricity, gas and waste services) (149,000).

Chart 6: Automotive employment vs. other industries

Source: IBIS World, Australia Automotive Industry Report Series (2011)reports an estimated59,000 people employed within the automotive manufacturing industry in 2010, DIISR.

Source: ABS, IBIS World, Australia Automotive Industry Report Series (2011)

0200000

400000

600000

800000

1000000

1200000

1400000

65 70 68 67 65 64 58 54 52

114 116 120 124 130 135 137 140 147

172 168181 176 178 177 172 171 173

0

50

100

150

200

250

300

350

400

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

Employment('000)

Manufacturing Servicing Retai l / wholesale



10/25

December 201110PwC

Productivity and innovation

Chart 7: R&D expenditure in automotive industry Research & Development in the automotive industry hasaveraged 8.1% growth over the past 10 years. During thistime, a total of $5.8 billion has been invested.

Chart 8 displays labour productivity (in terms of production value peremployee) in the automotive sector.As demonstrated, productivity hasgrown at an annualised rate of:

3.3% p.a. over the five year period 2005-2010

2.2% p.a. over the ten year period 2000-2010.

Since 2005, this growth in productivity has been driven primarily by adecrease in the number of employees, rather than growth in output.Output fell by 26% over the period, while there was a 36% fall in thenumber of employees.

The Australian manufacturing sector as a whole has also demonstratedmoderate labour productivity growth over this period. Labourproductivity (measured in terms of Gross Value Added per hour

worked) grew at an annualised rate of 1.8% p.a. over the ten years to2010 and has grown by 1.6% p.a. since 2005.

This growth reflects a similar trend to the automotive sector; outputover the 2005-2010 period grew by just 0.7% over the period, withproductivity gains driven by a 7% reduction in hours worked.



Chart 8: Productivity


$m

$100m

$200m

$300m

$400m

$500m

$600m

$700m$800m

$900m

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

0

5

10

15

20

25

30

Averagep

roductionvalueperemployee

(RHS)

Averagevehiclesproducedperemployee

Average production value per employee (RHS)

Average vehicles produced per employee (LHS)


11/25

December 201111PwC

Macroeconomic trends

When commodity prices normalise or when resources are depleted,tradeable sectors which have disappeared might simply notreappear*

This is especially true for the automotive manufacturing industry. The capital intensive natureof operations and high level of international competition would act as barriers to the industryre-establishing within Australia if under-investment and eroding competitiveness during theresource boom leads to a relocation of manufacturing plants to more competitive environments.There are a number of macroeconomic trends currently contributing to this erosion ofcompetitiveness, including:

The strength of the A$, intensified through Australias concentrated export markets andopenness to imports

Reduced access to, and increased competition for, capital

Rising transport fuel costs

Changing consumer demand

Reduced access to capital

Increasing costs of energy.

Source: Australian Government, Federal Budget 2010/11, Statement 4: Benefiting from Our Mineral Resources:Opportunities, Challenges and Policy Settings


12/25

December 201112PwC

Exchange rates

Chart 9: Historical performance of the $A The value of the Australian Dollar (A$) has a direct impact onthe profitability of the local automotive manufacturers.

With 40% of local production exported, the recent strength and volatilityof the A$ against the currencies of major trading partners and exportdestinations hampers export competitiveness and creates uncertaintyaround long term investment decisions.

Chart 9 demonstrates the recent strength and volatility against historicaltrends while Chart 10 demonstrates the appreciation of the A$ againstmajor vehicle export destinations since mid 2010. Key observations andimplications include:

The A$ has appreciated most against the United States Dollar (US$), afunction not only of the strength of the Australian economy, but alsothe weakness of the US economy. Australias largest automotive export

market is Middle Eastern countries (in 2010 44% of total exports)which peg their currency to the US$. Combined with exports to theUS, the price competitiveness of close to 50% of Australian automotiveexports are therefore tied to movements, and the current strength, ofthe A$ against the US$.

Against other key trading partners the A$ has also strengthened byaround 10%- 15%.

In the short-term, global economic uncertainty will continue to result in avolatile A$. In the long-term, sustained Chinese economic growth isexpected to support a strong A$ which will remain high by historicalstandards.

Chart 10: Appreciation of $A

Source: RBA (Daily data, 2011)

Source: RBA (Monthly data,2011)

95

100

105

110

115

120

125

130

135

95

100

105

110

115

120

125

130

135

01-Jun-10 01-Oct-10 01-Feb-11 01-Jun-11 01-Oct-11

Appreciationof$A,

Index $US

1 June 2010 = 100

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

Dec-1983 Dec-1992 Dec-2001 Dec-2010

US$ per A$

Long termaverage: 0.72



13/25

December 201113PwC

Industry performance and investment

Chart 11: Industry investment as % of total GDP The automotive industry is also facing a reduction in available finance.This stems from increased funding costs that have affected all industriespost the GFC. This is being intensified by the impact that the required

capital investment by the Australian resource sector is having upon otherindustries. This impact is shown in Chart 11 which demonstrates theincreased competition for investment against the mining industry.

In the long term, lower levels of capital investment are likely to limit therelative technological and productivity growth within the manufacturingsector. This not only stunts growth during the commodity boom (asdemonstrated in Chart 12); it makes it harder for these sectors to reboundonce the commodity boom comes to an end.

As pointed out by the Federal Treasury (2011):

When commodity prices normalise or when

resources are depleted, tradeable sectors whichhave disappeared might simply not reappear.

This statement emphasises that the ability of an industry to rebound after asustained commodities boom may be stifled, potentially beyond the point ofrecovery. This is especially true for the automotive industry. The capitalintensive nature of operations and high levels of international competition

would act as barriers to re-establishment within Australia if under-investment leads to a relocation of manufacturing offshore.

In the event that there is a hollowing out of industry during a resourcesboom, the Australian economy becomes exposed to the risk that it is notable to offset the decline in commodity prices by expanding non-resources

activities in a timely fashion.

Chart 12: Growth by industry, before and during the mining boom

0

1

2

3

4

5

6

7

8

9

89 91 93 95 97 99 01 03 05 07 09 11

% of GDP

Manufacturing

and services

Mining

Year ended 30 June

Source: ABS (2011)

Source: Commonwealth Government, Federal Budget 2011/12,Statement 4: Benefiting from Our Mineral Resources

Interpreting this chart:

A point close to the diagonal line indicates that the industry grew during the boom at asimilar rate to the six year period prior to the boom. A point north (south) of the diagonalindicates that the industry grew slower (faster) during the boom. (The chart is presented ingross value added, 2008-09 dollars. Services exclude construction and utilities.)

6

6

6

6

6

6

-1 0 1 2 3 4 5Average annual growth (per cent) 2003-04 to 2009-10

Average annual growth

(per cent) 1997-98 to

2003-04Construction

Services

MiningElectricity, gas,

water & wasteservices

Agriculture,

forestry & fishing

Manufacturing

1

2

3

4

5

6



14/25

December 201114PwC

Chart 13: Increasing oil prices and automotive fuel prices Higher oil prices and global economic uncertainty are resulting inchanging consumer preferences.

Increasing oil prices impact upon the Australian automotive industry in thefollowing ways:

increasing the cost of production through higher input and distributioncosts

reducing, or substituting domestic demand for vehicles due to higher fuelcosts

Shifting demand from larger to smaller (including diesel) vehicles.

Despite volatility, the price of oil has increased by over 200% during theperiod 2001 to 2011 (Chart 13). Australia has been shielded from the fullimpact of the rising global oil price by the appreciation of the $A.

The full magnitude of the world oil price increases have not directly flowedthrough to consumers, with the costs of automotive fuel increasing by justunder 60% across the period 2001 to 2011. However, over the past year therebounding price of oil has translated to increasing consumer fuel costs, with

both oil and petrol prices rising by 13.9%. This trend has contributed to a shiftto smaller and lower fuel consumption vehicles, and diesel engines.

Oil prices and consumer sentiment

0

100

200

300

400

500

600

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11West Texas Intermediate (Indexed) CPI - Automotive fuel subgroup (Indexed)

1 June 2000 = 100

Source: ABS (2011), Cat. 6401.0, WTI $US per barrel, http://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-long(2011)

-3

-2

-1

0

1

2

3

01 02 03 04 05 06 07 08 09 10 11

Chart 14: Australian consumer confidence(standard deviation from long term average)

Source: Westpac Melbourne Institute (2011),

http://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-longhttp://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-longhttp://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-longhttp://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-longhttp://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-longhttp://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-longhttp://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-longhttp://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-longhttp://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-longhttp://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-longhttp://www.economagic.com/em-cgi/data.exe/var/west-texas-crude-long


15/25

December 201115PwC

Government supportGovernments are increasinglytrying to influence conditions in the

job-intensive automotive industry,using mechanisms such as loans,incentives and premiums. At the sametime, protectionism is growing.

Seventeen of the G20 countries haveintroduced protectionist measuressince the financial crisis 2008/2009,distorting global trade in goods by an

estimated USD 50 billion per year.Roland Berger (2011)

Around the world, Governments have responded to decreasing access to finance anddeteriorating market conditions by focusing on investment attraction, or co-investment.Co-investment can take the form of funding, grants, partnership arrangements orincentives designed to attract the investment required for the design and production of thenext generation of vehicles and strengthen the ability of the local industry to compete bothdomestically and globally. Competition between countries to attract this investment issignificant.

These policies can be viewed as a response by governments to (re)diversify and strengthentheir manufacturing base in the face of weakening high value add services industries suchas finance and insurance.

Concurrent to co-investment policies are tariff barriers and free trade agreements (FTAs)which shape the international trade environment. Within Australia, the retail market forcars is one of the most open and competitive in the world.

This has been driven by the Australian Governments unilateral reduction applied togeneral automotive tariff from 10% to 5% in 2010. Yet other major automotivemanufacturing nations have responded to the economic down-turn by increasing protective

barriers. Moreover,Australias free trade agreementsdo not appear to be providingreciprocal market access for Australian vehicle manufacturers.


16/25

December 201116PwC

0

1020

30

40

50

60

70

80

%o

fM

arketShare

Local Imported

Tariff barriers

Chart 15: Global automotive headline tariffs

Foreign access to the Australian automotive market has increasedsignificantly in recent years through the successive reductions intariff barriers and the formalising of FTAs.

As can be seen in Chart 15, a number of key Australian export markets (which

also house companies that compete in Australia's domestic market) operatebehind high tariff barriers. Australia currently imposes one of the lowestimport tariffs of 5%, however this level is not directly reciprocated by ourtrading partners.

This theme of tariff level reciprocity is mirrored in current FTAs. Two keyagreements, both of which came into force on 1 Jan 2005, are the Thailandand US FTAs. The implications of these agreements on import and exporttariffs are discussed below:

ThailandThe import tariff on Thai manufactured vehicles was reducedto zero on 1 January 2005. For the export of Australian manufactured

large and commercial vehicles, tariff barriers were eliminated. For othervehicles, tariff barriers were dropped from 80% to 30% on 1 January2005, before being phased down to 6% in 2010. Tariffs on exportedengines remain at 15%. However, a range of non-tariff barriers such asexcise taxes remain in place. The excise tax structure is complex and ischarged based on the engine capacity of a vehicle. Which works against

Australian manufactured vehicles and favours domestic manufacturers.These non-tariff barriers add to the Thai retail cost of imported vehicles.

USImport of US manufactured vehicles and parts was reduced to 3% in2008 and zero in 2010. Exports of Australian manufactured vehicles andparts have zero tariff applied.

This increasing access given to foreign competitors to the Australian markethas coincided with the emergence of the resource boom discussed previously.These two forces have had a marked impact upon the relative performance ofdomestic manufacturers. Chart 16 shows the declining market share ofdomestic manufacturing brands from holding 55% of market share in 2005 toless than 40% market share in 2010. This represents a phenomenal pace ofchange in the competitive landscape facilitated by increased market access,and magnified by the additional domestic pressures local manufacturersstarted to feel as the result of the mining boom.

Source: DFAT (2011)US Department of Commerce (2008)

Chart 16: Market share of domestic manufacturingcompanies vs. Foreign manufacturing companies

Source: DIISR, Key Automotive Statistics (2010), DFAT (2011)

100%

35%25% 25%

10%8% 5%

0%

20%

40%

60%

80%

100%

120%

Tariff

General automotivetariff cut from 15%

to 10%

Government support

US and Thailand

FTA entered intoforce 1 Jan 2005

General automotive

import tariff cut from10% to 5%


17/25

December 201117PwC

Government investment attraction policies

Case study Incentive Package to drawinvestment into the state of Tennessee*

Description

In 2008, the US federal, state and municipal governments jointlyoffered an incentive package to Volkswagen to build an assembly plantat Chattanooga in the state of Tennessee. Volkswagen investedapproximately $US 1 billion to construct the facility with thegovernments combined offering an estimated $US 577 million.

Incentives included job tax credits, industrial machinery credits,infrastructure investments and workforce investments includingrecruitment, screening and training support.

The breakdown of support was $US 22 million from the federal

government, $US 336 million from the state government and $US 219million from the municipal government.

Value: $US 577 million

Outcome: The US$1.5 billion automobile assembly plant was built inTennessee . It began production in April 2011. In July 2011 the plantreported that it had hired its 2000themployee and in September 2011 ithad assembled its 10,000th automobile. It has a projected annualproduction of 150,000 cars.

The focus of overseas Governments on co-investment policieshas resulted in intense competition, from both countries andsmaller jurisdictions within these countries, to attract and

retain investment in automotive design and manufacturing.

Following the GFC, intervention in the market by overseas governmentshas increasingly taken the form of investment attraction (or co-investment)policies.

This can be viewed as a response by governments to (re)diversify andstrengthen their manufacturing base in the face of weakening high valueadded services industries such as finance and insurance. The protection orattraction of automotive vehicle design and manufacturing has been seen

by governments to not only secure or directly stimulate employmentgrowth, but also secure the employment and value added associated withthe supply chain that accompanies these industries.

The following case studies highlight:

the varied nature of investment at traction policies adopted bygovernments around the world and the benefits these provide toautomotive manufacturers

the outcomes of these policies to governments in terms of retaining andattracting both foreign and domestic investment

the often opaque nature of the policies.

The implication of these policies is intense competition, from bothcountries and smaller jurisdictions within these countries, to attract and

retain investment in automotive design and manufacturing. Thesegovernment policies recognise the value, in terms of jobs and economicoutput, to the local economy. They also provide a competitive advantage tocompanies based in overseas markets: companies against which localmanufacturers not only compete against in export markets, but alsoincreasingly compete against in the domestic market.

Government support

* Full case study sources provided on pages 26-27


18/25

December 201118PwC

Case Studies Government investment attraction policies

Case study Incentives to shift the productionof automobile lithium-ion batteries toMichigan*

Description

The US Federal Government Department of Energy offered a financialgrant to LG Chem / Compact Power to shift the production ofautomobile lithium-ion batteries to the US. The $US 151 million wasused by LG Chem and Compact Energy to build a battery cell plant inMichigan.

LG Chem, Ltd. is South Koreas largest chemical and rechargeablebattery maker in terms of both size and performance. The company willmanufacture lithium-ion polymer battery cells for the General MotorsChevrolet Volt at the plant in Holland, Michigan.

The Department of Energy is also funding other similar battery plants,including those owned by Johnson Controls Inc., A123 Systems Inc.,EnerDel Inc. and General Motors.

Value: $US 151 million to date

Outcome: The $US 303 million Michigan cell plant is scheduled forcompletion in late 2011.It is expected to employ 300-400 people by2013. At full production, it is planned to have enough capacity toproduce cells for 50,000 to 200,000 battery packs. Six battery cellmanufacturing plants have since decided to locate in Michigan, morethan in any other US state.

Case study UK and EuropeanInvestment Bank (EIB) supportfor Nissan electric cars*

The Grant for Business Investment Scheme encourages firms to set upnew greenfield plants in disadvantaged areas of the UK. It is a granttargeted at sustainable business investment and job creation projects indisadvantaged areas in England.

The European Investment Bank (EIB) targets advancements in vehicleand battery technology that can contribute to improved air quality andhelp address climate change.

The UK Government and the EIB have joined forces to offer a largefinancial incentive to Nissan Motors to locate plants dedicated toproducing electric car batteries and their Nissan Leaf model (both

focussed on the development of electric cars) in Sunderland in the UK.

The Nissan Leaf is billed as the first mass-market electric car, and iscurrently being produced in Oppama, Japan. It has a 100 mile range onone charge and a top speed of 90mph.

Value: EUR 220 million from EIB and GBP 20.7 million from the UKGovernment

Outcome: Nissan Motors has invested GBP 420 million (EUR468.2million) in the battery and Leaf projects and is expected to maintainabout 2,250 jobs in Sunderland and across the UK supply chain. NissanLeaf production in Sunderland will begin in 2013. Initial annualproduction capacity is expected to be approximately 50,000 units. TheNissan battery facility will have a production capacity of 60,000 units a

year and is expected to start manufacturing batteries in 2012 for bothNissan and its Alliance partner Renault.

Government support




19/25

December 201119PwC

Case study EuropeanInvestment Bank (EIB) greentechnology grant to Ford*

Description

The European Investment Bank (EIB) provided GBP 450 million toFord for R&D of a new generation of environmentally friendly low-carbon engines and vehicle technologies at Ford manufacturingplants across the United Kingdom. The funding is to support a newgeneration of fuel efficient and low-emission diesel and petrolengines under the European Clean Transport Facility. R&D of petrolengines will include additional investment in Fords Bridgend plant,located in a European Convergence Region.

The package, backed by an 80% loan guarantee from the UK

government, formed part of Fords five year GBP 1.5 billion engineand vehicle development programme.

The investment partly funded by the European Investment Bank isexpected to safeguard around 2,800 skilled jobs.

Value: GBP 450 million.

Outcome: A commitment by Ford to GBP 1.5 billion over 5 years topursue an environmentally friendly engine, while protecting 2800skilled jobs in the UK and enhancing the skills and capabilities ofFords UK workforce.


Case study Polish GovernmentSupport for Pilkington automotiveparts supplier*

Description

Pilkington Automotive , supplying automotive parts to GeneralMotors, Mercedes-Benz, Fiat, Volkswagen, Ford and the PSAPeugeot Citroen is building a second manufacturing plant in Poland

valued at EUR 104 million with financial support from the Polishgovernment.

Pilkinton is investing EUR 81 million with Panattoni (a localproperty developer) providing funding of EUR 23.1 million.

The Polish government will provide EUR 21.5 million to the project.

The plant will produce a range of laminated car windows for

passenger vehicles and trucks.

Value: EUR 21.5 million

Outcome: The Chmielow plant will produce nearly 2 millionwindscreens and approximately 5 million side and rear windows ayear, doubling Pilkingtons current capacity in Poland. The facility isexpected to employ 400-500 people, and a further 150 jobs will becreated downstream. The first assembly lines at the new factory

were installed in mid-2011, while the main production lines will beset up from mid-2012 through the. end of 2013.

Government support

* Full case study sources provided on pages 26-27 * Full case study sources provided on pages 26-27


20/25

December 201120PwC


Caste study Ontario GovernmentInvestment into Magna Internationals R&Dfor electric vehicles*

Description

Magna International Inc. and the Ontario government will invest morethan CDN $400 million into R&D for electric vehicles (EVs), with CDN$48 million coming from the Ontario government. Magna is currentlythe largest automotive supplier in North America, and will use thefunding to further develop its electric car systems and continueexploration of next generation clean vehicle technology. The funding has

been allocated to 19 different projects over the next 6 years includingconcept electric cars, parts for hybrid vehicles, metallic components,alternative energy and ways to improve fuel efficiency.

The investment is expected to create more than 700 jobs and maintainabout 1,300 jobs at Magna facilities in Brampton, Aurora, Concord, andSt. Thomas, Ontario.

Value: CDN $48 million

Outcome: CDN $400 million invested into environmental friendlyR&D, maintaining and creating skilled jobs. Fostering investment into

battery-powered vehicles, plug-in hybrids, and hybrid vehicles poweredby electric motors and gasoline, within the province of Ontario.

Case Study Thai Government tax incentivesfor Eco-Car manufacturers*

Description

The Thailand government is offering aggressive tax incentives forEco-Car manufacturers. Specifically, they are offering an 8-yearcorporate income tax holiday and duty-free importation of machinery toeco-car part projects that have a minimum investment value of 10million baht.

The Thai Finance Ministry also allows car makers to pay a reducedexcise tax of 17% on cars with petrol-powered engines smaller than1,300cc ,and diesel-powered engines below 1,400cc. As the excise taxlevied on standard passenger cars is currently 30 to 40%, the tax

reductions for eco-cars amount to a US $2,000 drop in the sticker priceper vehicle.

Value: Substantial

Outcome: Six global auto assemblers proposed investments in 2009,totalling an annual production capacity of 675,000 eco-cars and the firstThai eco-cars began production in early 2010. One example ofinvestment under the scheme is Mitsubishis newly built plant (itsthird) in Thailand, with an annual production capacity of 150,000

vehicles.

Growth in the eco-car sector is also providing benefits to parts and

component manufacturers.

Government support


http://www.google.com.au/imgres?imgurl=https://www.cia.gov/library/publications/the-world-factbook/graphics/flags/large/ca-lgflag.gif&imgrefurl=https://www.cia.gov/library/publications/the-world-factbook/geos/ca.html&usg=__LeqEsPZpx3ePhyx7WxbE70CQOEM=&h=302&w=601&sz=4&hl=en&start=3&zoom=1&tbnid=PKNGBTam99y63M:&tbnh=68&tbnw=135&ei=YRLPTovzH8qUiQfl6-TJDg&prev=/search?q=canada&um=1&hl=en&sa=N&gbv=2&tbm=isch&um=1&itbs=1


21/25

December 201121PwC

The longevity of co-investment policies

The longer term capacity of many developed countries tosupport wide scale co-investment policies should bequestioned.

It is expected that while economic uncertainty and market volatilitycontinue in the short to medium term, governments will continueto promote co-investment policies as a way to secure jobs, diversifytheir economic base and attract investment.

However, many developed countries potentially lack the long-termfiscal capacity to continue support of co-investment policies. Chart19 indicates countries net borrowings (ie. current budget position)on the vertical axis, and general government (ie. public sector) debtas a percentage of annual GDP on the horizontal axis. There aretwo important points to note about his chart:

1. A debt to GDP ratio greater than 90% is generally consideredunsustainable.* At this level the increased burden of servicingthe debt hampers economic growth, leading to a spirallingdeterioration in economic performance.

A number of major EU countries have already surpassed thislevel, with others such as Spain, France, the UK and USexpected to move closer, or surpass this threshold in thecoming years. Countries in this position will find it increasinglydifficult to support co-investment schemes as austeritymeasures will be required (or as currently seen in the EUforcefully imposed) to bring public sector debt back to

manageable levels.

2. Compared to other developed nations, Australia does not haveeither a budget deficit or public debt issue. Furthermore,

Australias ability to leverage the benefits of the resource boomimplies this position is likely to strengthen rather thandeteriorate relative to other developed countries.

Chart 19: Government borrowing and net debt, 2011

Source: IMF World Economic OutlookApril 2011 database. * Public debt figures for China, India andRussia are gross, not net debt

-15

-10

-5

0

5

10

15

-175 -150 -125 -100 -75 -50 -25 0 25 50 75 100 125 150 175

% of GDP

AustraliaBelgium

Canada

Denmark

Finland

France

Germany

Greece

Iceland

Ireland

Italy

Japan

Korea

NetherlandsNZ

Norway

PortugalSpain

UK

Sweden Switzerland

US

% of GDP

'General government' net debt

'Generalgovernment'netborrowing

China*

India*

Brazil

Russia*

Government support

* Reinhart, Rogoff, Growth in a Time of Debt, 2010


22/25

December 201122PwC

Industry outlookDrawing together the macroeconomic, trade policy and government support forces which shapethe competitive environment in which the Australian automotive manufacturing industryoperates the following observations can be drawn:

The trend of increasing protection can be expectedto continue in the short to medium term while thereis lingering global economic uncertainty and

volatility. From a domestic perspective, these co-investment policies pursued by overseas

governments are creating a highly competitiveenvironment in which Australian manufactures needto attract investment to underpin the research,development and production of the next generationof low emission technology vehicles.

In the longer term, many of the overseasgovernments that have re-established co-investmentprograms will not necessarily have the fiscal capacityto sustain this level of assistance. This contrasts to

Australia which has a relatively sound fiscal position.

The industry will feel pressure during anextended resource boom through increasedcompetition for capital and labour, although theeffects of this are expected to be secondary to theimpact of the stronger local currency.

During the course of a prolonged resource boom,the industry will continue to have internationaland domestic competitiveness eroded by higherexport prices and cheaper import prices.

There appears to be a reversal in the trendtowards trade liberalisation and increasedmarket access pursued through the WTO andFTAs, with a wave of government intervention,that can be viewed as protectionist, increasing inthe wake of the global economic downturn.


23/25

December 201123PwC

Sources

Case Study 1 Incentive Package to draw investment into thestate of Tennessee

Al.com (2011), Volkswagens new $1 billion plant up and running in Chattanooga,accessed 30thNovember 2011 at:http://blog.al.com/breaking/2011/05/volkswagens_new_1_billion_plan.html

Examiner.com (2011), Volkswagen receives $570 million in tax incentives for newplant in Tennessee, accessed 30thNovember 2011 at:http://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennessee

Knoxvillebiz.com (2011), Chattanooga Volkswagen plant up and running, makingfuel-efficient Passat model,accessed 30thNovember 2011 at:http://www.knoxnews.com/news/2011/may/25/volkswagen-up-and-running/

Case Study 2 Incentives to shift the production of automobilelithium-ion batteries to Michigan.

Argonne (2011), LG Chem,Argonne sign licensing deal to make, commercializeadvanced battery material,accessed 30thNovember 2011 at:http://www.anl.gov/Media_Center/News/2011/news110106a.html

Green Car Congress (2011), GM,LG Chem licensing Argonne Labs layered-layeredcomposite cathode material for Li-ion batteries; substantial increase in energycapacity and safety, accessed 30thNovember 2011 at:http://www.greencarcongress.com/2011/01/anlgm-20110106.html

Mlive.com (2011), Construction complete at LG Chem battery plant, 300 employeesexpected in 2012, accessed 30thNovember 2011 at:http://www.mlive.com/business/west-michigan/index.ssf/2011/09/construction_complete_at_lg_ch.html

Case study 3 UK and European Investment Bank (EIB) supportfor Nissan electric cars

Automotive Business Review (2011),Nissan to build Leaf in UK from 2013, accessed30thNovember 2011 at: http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111

Nebusiness.co.uk (2011), 188m deal to support Nissan Leaf production, accessed30thNovember 2011 at: http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/

The engineer (2011), European fund supports production of Nissan LEAF, accessed30thNovember 2011 at:http://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.article

Case study 4 European Investment Bank (EIB) green technology grantto Ford

Financial Times (2010), UK pledges 381m support package for Ford and Nissanprojects, accessed 30thNovember 2011 at: http://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.html#axzz1fGer011V

Nine News (2010), UK backs Ford on green technologies, accessed 30 thNovember2011 at: http://202.58.48.79/article.aspx?id=1029231
http://blog.al.com/breaking/2011/05/volkswagens_new_1_billion_plan.htmlhttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.knoxnews.com/news/2011/may/25/volkswagen-up-and-running/http://www.anl.gov/Media_Center/News/2011/news110106a.htmlhttp://www.greencarcongress.com/2011/01/anlgm-20110106.htmlhttp://www.mlive.com/business/west-michigan/index.ssf/2011/09/construction_complete_at_lg_ch.htmlhttp://www.mlive.com/business/west-michigan/index.ssf/2011/09/construction_complete_at_lg_ch.htmlhttp://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.htmlhttp://202.58.48.79/article.aspx?id=1029231http://202.58.48.79/article.aspx?id=1029231http://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/c14677da-32f6-11df-bf5f-00144feabdc0.htmlhttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.theengineer.co.uk/sectors/automotive/news/european-fund-supports-production-of-nissan-leaf/1010852.articlehttp://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.nebusiness.co.uk/business-news/latest-business-news/2011/11/10/188m-deal-to-support-nissan-leaf-production-51140-29750770/http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.automotive-business-review.com/news/nissan-to-build-leaf-in-uk-from-2013-101111http://www.mlive.com/business/west-michigan/index.ssf/2011/09/construction_complete_at_lg_ch.htmlhttp://www.mlive.com/business/west-michigan/index.ssf/2011/09/construction_complete_at_lg_ch.htmlhttp://www.mlive.com/business/west-michigan/index.ssf/2011/09/construction_complete_at_lg_ch.htmlhttp://www.greencarcongress.com/2011/01/anlgm-20110106.htmlhttp://www.greencarcongress.com/2011/01/anlgm-20110106.htmlhttp://www.greencarcongress.com/2011/01/anlgm-20110106.htmlhttp://www.anl.gov/Media_Center/News/2011/news110106a.htmlhttp://www.knoxnews.com/news/2011/may/25/volkswagen-up-and-running/http://www.knoxnews.com/news/2011/may/25/volkswagen-up-and-running/http://www.knoxnews.com/news/2011/may/25/volkswagen-up-and-running/http://www.knoxnews.com/news/2011/may/25/volkswagen-up-and-running/http://www.knoxnews.com/news/2011/may/25/volkswagen-up-and-running/http://www.knoxnews.com/news/2011/may/25/volkswagen-up-and-running/http://www.knoxnews.com/news/2011/may/25/volkswagen-up-and-running/http://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://www.examiner.com/finance-examiner-in-national/volkswagon-receives-570-million-tax-incentives-for-new-plant-tennesseehttp://blog.al.com/breaking/2011/05/volkswagens_new_1_billion_plan.html


24/25

December 201124PwC

Sources

Case study 5 Polish Government Support for Pilkingtonautomotive parts supplier

Adamowski, J (2011), Poland: Pilkington to invest 350m zloty in new plant,accessed 24thNovember 2011 at:http://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-plant

Ceramic Industry (2011), NSG Group Announces Automotive Glazing Expansion,accessed 30thNovember 2011 at:http://www.ceramicindustry.com/Articles/Todays_Headlines/BNP_GUID_9-5-2006_A_10000000000001016601

NSG Group (2011),NSG Group Announces Major Expansion of Automotive GlazingCapacity and Capability in Poland, accessed 30thNovember 2011 athttp://www.pilkington.com/websitev2/both/subsites/nsgcom/iframes/media-pr-2011-10032011.htm

Case study 6 Ontario Government Investment into MagnaInternationals R&D for electric vehicles

Canadian Manufacturing (2011),Magna makes $400 million investment in EVs,accessed 24thNovember 2011 at: http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656

CTV News (2011), Magna, Ontario to invest in electric vehicle research, accessed30thNovember 2011 at: http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/

Electric Vehicle Update (2011), Canada: Ontario government emerging as EV hub,accessed 30thNovember 2011 at: http://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hub

Case Study 7 Thai Government tax incentives for Eco-Carmanufacturers

Bangkok Post Auto (2011),Nissan launches second eco-car, wants higher taxrebate, accessed 30thNovember 2011 at:http://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebate

Business in Asia (2009), Thailands automotive industry to see growth accelerate,accessed 30thNovember 2011 at: http://www.business-in-asia.com/automotive/thailand_automotive.html

Go Auto.com.au (2009),Suzuki commits $251 million to building eco compact carin Thailand from 2012, accessed 30thNovember 2011 at:http://www.goauto.com.au/mellor/mellor.nsf/story2/FB061B9E87C26D63CA25767E001070C2
http://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.ceramicindustry.com/Articles/Todays_Headlines/BNP_GUID_9-5-2006_A_10000000000001016601http://www.ceramicindustry.com/Articles/Todays_Headlines/BNP_GUID_9-5-2006_A_10000000000001016601http://www.pilkington.com/websitev2/both/subsites/nsgcom/iframes/media-pr-2011-10032011.htmhttp://www.pilkington.com/websitev2/both/subsites/nsgcom/iframes/media-pr-2011-10032011.htmhttp://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.business-in-asia.com/automotive/thailand_automotive.htmlhttp://www.business-in-asia.com/automotive/thailand_automotive.htmlhttp://www.goauto.com.au/mellor/mellor.nsf/story2/FB061B9E87C26D63CA25767E001070C2http://www.goauto.com.au/mellor/mellor.nsf/story2/FB061B9E87C26D63CA25767E001070C2http://www.goauto.com.au/mellor/mellor.nsf/story2/FB061B9E87C26D63CA25767E001070C2http://www.goauto.com.au/mellor/mellor.nsf/story2/FB061B9E87C26D63CA25767E001070C2http://www.business-in-asia.com/automotive/thailand_automotive.htmlhttp://www.business-in-asia.com/automotive/thailand_automotive.htmlhttp://www.business-in-asia.com/automotive/thailand_automotive.htmlhttp://www.business-in-asia.com/automotive/thailand_automotive.htmlhttp://www.business-in-asia.com/automotive/thailand_automotive.htmlhttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://www.bangkokpost.com/auto/autoscoop/260304/nissan-launches-second-eco-car-wants-higher-tax-rebatehttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://analysis.evupdate.com/industry-insight/canada-ontario-government-emerging-ev-hubhttp://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.ctv.ca/CTVNews/Canada/20110829/ontario-magna-announcing-e-vehicle-research-funding-110829/http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.canadianmanufacturing.com/design-engineering/news/magna-makes-400-million-investment-in-evs-40656http://www.pilkington.com/websitev2/both/subsites/nsgcom/iframes/media-pr-2011-10032011.htmhttp://www.pilkington.com/websitev2/both/subsites/nsgcom/iframes/media-pr-2011-10032011.htmhttp://www.pilkington.com/websitev2/both/subsites/nsgcom/iframes/media-pr-2011-10032011.htmhttp://www.pilkington.com/websitev2/both/subsites/nsgcom/iframes/media-pr-2011-10032011.htmhttp://www.pilkington.com/websitev2/both/subsites/nsgcom/iframes/media-pr-2011-10032011.htmhttp://www.pilkington.com/websitev2/both/subsites/nsgcom/iframes/media-pr-2011-10032011.htmhttp://www.pilkington.com/websitev2/both/subsites/nsgcom/iframes/media-pr-2011-10032011.htmhttp://www.ceramicindustry.com/Articles/Todays_Headlines/BNP_GUID_9-5-2006_A_10000000000001016601http://www.ceramicindustry.com/Articles/Todays_Headlines/BNP_GUID_9-5-2006_A_10000000000001016601http://www.ceramicindustry.com/Articles/Todays_Headlines/BNP_GUID_9-5-2006_A_10000000000001016601http://www.ceramicindustry.com/Articles/Todays_Headlines/BNP_GUID_9-5-2006_A_10000000000001016601http://www.ceramicindustry.com/Articles/Todays_Headlines/BNP_GUID_9-5-2006_A_10000000000001016601http://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-planthttp://www.automotiveworld.com/news/suppliers/86419-poland-pilkington-to-invest-z-350m-in-new-plant


25/25

pwc.com.au

2011 PwC. All rights reserved. Not for further distribution without the permission of PwC. "PwC" refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or,as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does notprovide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in anyway. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm's professional judgment or bind anothermember firm or PwCIL in any way.

Liability is limited by a Scheme approved under Professional Standards Legislation.

Are Australian Car Industry Subsidies Worth Keeping?

Documents

Transcript of Are Australian Car Industry Subsidies Worth Keeping?