Introduction: Global trends are driving dramatic changes in both the demand for motor vehicles and the size, scale and location of production.

• The global financial crisis significantly disrupted demand for motor vehicles in developed countries during 2008 and 2009, and demand in a number of these countries has been slow to rebound. On the other hand, growth has been strong in developing countries — especially China. Globally, there is a growing consumer preference for small cars and sports utility vehicles (SUVs).
• On the supply side, there is strong competition in the small- to medium-size, high-volume, low-margin vehicle segment of the market (‘high-volume vehicles’), which results in relentless pressure to lower manufacturing costs. Motor vehicle producers are increasingly moving to global platforms and are investing in large-scale plants in low-cost locations in regions of growing demand, or where there are export advantages such as can arise from preferential trade arrangements. Many governments are offering significant assistance to retain or attract automotive manufacturing, but there is little transparent analysis that would enable an observer to robustly assess the net benefit of this assistance to a nation’s economy.

During the global financial crisis, restructuring in the automotive manufacturing industry resulted in many thousands of jobs being lost in developed countries. In the United States, between 2007 and 2009, employment declined by around 62 000 in assembly plants and around 194 000 in component manufacturing firms (Klier and Rubenstein 2012). At the same time, jobs were being created in other countries and regions, such as Thailand and, in particular, China.

Australia is a very small player in the global context of automotive manufacturing. Australia’s new vehicle sales of just over 1 million units were around 1.4 per cent of the 82 million passenger and commercial vehicles sold globally in 2012. Nearly 90 per cent of new vehicle sales in Australia are of imported vehicles, with domestically-produced cars having lost considerable market share in Australia over the past decade (DIISRTE 2013). Australia’s share of global production, at just over 200 000 units, was about one-quarter of 1 per cent in 2012 (OICA 2013a), and of that, about 40 per cent was exported.