The beginning of the end

12 02 2014

If you are an Australian, you will be well aware that we will no longer be making cars in this country within three years.  If you are reading this from somewhere else in the world….. pay attention!

The media here is falling over itself asking why this is happening.  Every darn reason is churned over, and over, and over.  Political points are being scored left right and centre.  It’s their fault….  NO, it’s your fault……  or it’s the high dollar, or it’s the unions, or the lack of tariffs, or maybe they were just building the wrong cars and the Australian market didn’t want those cars……  and our Prime Moronster is taking a hit (which is good..), but really, the two parties that have been in power for the past hundred years or more have little to do with what’s happening here.  The fact they don’t seem to know what is really going on is very worrying.  The lights are on, but nobody’s home……

Holden’s demise was sealed in 2009.  When the financial crisis, triggered by high oil prices, the very same year that saw the US government force GM as a condition of its bail-out to dump the Pontiac brand, for which Holden’s Commodore SS was planned to play a major role, our export car market hit the wall….  Worse, local production of its supposedly fuel efficient (7.4/100km – no bone shaker here) Cruze came too late. So we have peak oil ignorance being all the way to the very end – without any chance for a transition to an EV of sorts…..
Then we have the Conversation publishing an article stating “it’s generally accepted, the car industry is a cr

Matt Mushalik

Matt Mushalik

itical part of Australia’s science and technology base. The sector spends A$600 million a year on R&D and another $800 million on buying inputs from the computing, engineering and consulting industry. So it’s a major producer and user of knowledge.”  Really…?  Where’s the innovation in any Australian car?  My 17 year old Citroen has better suspension technology that any Commodore, and it’s able to produce better fuel efficiency than a Cruze….  Even Toyota’s hybrid Camry is…..  well, just a hybrid!

Personally, I think Matt Mushalik hit the nail on the head with the following charts…..

Holden’s problems started more than 10 years ago
The perfect storm had come much earlier than a high Australian dollar which went above earlier 1990 levels of 75 US cents only after 2007
Underlying graph from:
It was high oil prices which started to exceed permanently the $20 a barrel level in 2002:
That changed the whole car market for good:
Charts which of course leave out the still popular Four Wheel Drive Toorak Tractors……  Somebody must have more money than me, the $100 it costs to fill either of our cars is a significant budgetary impost in this household…
There are eye popping stats in Matt Mushalik’s article….  like the fact 42% of all the cars we exported went to….. Saudi Arabia, the land of the cheapest petrol!
Holden’s research consistently shows that consumers do not value improved fuel efficiency highly. At least in a relative sense, fuel efficiency ranks relatively low when compared to other vehicle attributes such as performance, towing capacity, features and safety. This can be attributed in the main to the relatively low cost of fuel in Australia, and it appears unlikely that this will change in the short to medium term. What it means in practical terms is that if we are required to incorporate new technologies into our vehicles that the consumer does not value, we will obviously not be in a position to recover the cost of those technologies in the price of the vehicles. Ultimately, this will have the effect of rendering our vehicles less competitive in the marketplace” (p 44
And talk of wrong ideas……:

(3.2.1) Holden submission May 2002
Holden made following main points in relation to fuel costs, efficiencies and  commercial production thresholds:
  • In terms of technological change alone, the automotive industry is on the brink of a major shift as we make the transition from internal combustion engines to fuel cells. (p 10)

Fuel Cells?  Well, it was 11 or 12 years ago, but it’s evident today that virtually nobody is still pursuing fuel cells to power cars, most R&D is now in electric vehicles with batteries.

Mushalik concludes with:

The Holden history tells us that wrong decisions were done 10-15 years ago. The 2005 Hirsch report to the US Department of Energy warned it would take 10-20 years to prepare for peak oil. This time has been wasted by Australian governments and the car industry by continuing what was essentially business-as-usual. The unexpected US shale oil boom resulted in global crude production in 2013 getting higher than 2005 but this did not reduce oil prices – although it might have helped to stop oil prices from skyrocketing beyond experience.
If you think that lessons have been learned for other oil-dependent sectors of the economy you’ll be disappointed. The equivalent of the love affair with big cars and 3 litre engines is the continuing push of governments for additional highways, toll-ways and road tunnels instead of electric rail development.
I’m still waiting on the final Australian Oil Production figures for 2013 to be published by BREE to update my yearly posts on our end of oil crisis….  watch this space.  In the meantime, Shell has announced it is totally pulling out of Australia.  Everything.  Service Stations and refineries, the lot.  Now exactly why would they do this…..?

Automobile deathwatch

10 12 2013

The media is alight with reports of GMH Holden closing its doors some time in 2014.  And this, so short a time since Ford Australia told the world it was doing the exact same thing earlier this year.

There’s outrage everywhere, not least the blogosphere (like this) where everyone’s blaming the new government (for whom I have no time at all..), as if they were actually in charge….  Except they’re not in charge; larger forces at hand are, and the car is dying.  Cars are going extinct, just like the dinosaurs that they have become.

In the last census held just five months ago, there were 17.2 million vehicles counted in Australia, including motor cycles, and about half a million were ‘trucks’ of various types.  Which means that, roughly, there are some 16 million cars registered for a population of 23 million, or almost 1.5 cars per 2 people.  Let’s face it, there are two cars for two people in this supposedly green household…

I know when I drive on the freeway to Brisbane at my leisurely 90 km/h, hundreds of cars and many trucks pass me.  Every time I do this (as less often as possible you must understand!) I know we are stuffed.  All I can think about are the tonnes of non renewable fuel consumed to do this, and unbelievable amounts of debt that must be out there to pay for all that travelling.  And yet, it wasn’t like this once…..

Just pretend for a moment that you’re a farmer at the dawn of the 20th century.  You’ve got all the seeds you need for the next growing season, all the ploughs, hoes, and other accessories, too.  You’d be out in the paddocks now, except for one problem: you haven’t got a horse….!  Or a bullock…

That’s a major disaster…. How can you run your farm without a horse to do the heavy lifting….?

Three generations ago, that would have been a real head-scratcher.  Today, however, the answer is obvious: head down to Massey Ferguson and fork out for a tractor.  With debt of course……

From our current perspective, the transition from horses to horsepower appears seamless, but in fact it didn’t happen like that, nor was it accidental.  It was a complex process that leveraged emerging technologies to address rapidly changing needs in the farming sector.  At a time, let’s not forget, oil production was rising fast, and oil was cheaper than chips… Farmers didn’t just switch to tractors because tractors were more efficient than horses, they switched to tractors because farmers had to produce exponentially larger amounts of food for a population that was abandoning rural life for bustling cities, thanks to the Fossil Fuelled Industrial Revolution.  And because the farmers’ big switch worked, vast numbers of people could leave farming altogether, forcing tractors to get bigger and faster, thus  fuelling a vicious circle of dependence.

Something similar is happening to the car as we speak.

A century later, the private car is dying. Older Australians may still appreciate the vehicles parked in their driveways, but as we’ve seen time and time again, young people just don’t care.  In 1991, of NSW kids aged 20-24, 79 per cent had licences. By 2001 it had risen to 80 per cent. Yet by 2008 it had crashed to just 51 per cent and continues to decline. A new study in Victoria by Monash University shows the number of licence holders under 30 is dropping at more than 1 per cent a year.  Neither of our 26 year old twins have a license, though one of them is currently learning to drive just to be able to get work now he’s finished University……

But there’s more to it than that: young people aren’t blase about cars simply because it’s harder to get a license nowadays, or because they can’t afford them (although those are contributing factors). It’s because cars are no longer necessary.

A paper by Curtin University academics Peter Newman and Jeff Kenworthy, Peak Car Use: Understanding the Demise of Automobile Dependence, cites soaring oil prices, traffic congestion, a preference for inner-city living, public transport growth, an ageing population, and more crowded cities for pushing people away from cars. ”Peak car use is a major historical discontinuity that was largely unpredicted by most urban professionals and academics,” write the authors.

So why is everyone surprised, even outraged, that the car companies are closing their doors?  Especially when they build totally inappropriate cars for today’s capacity to fuel them….?

The rationale for building cars in Australia is about as thin as an EH Holden’s paintwork.  In competition with much bigger and cheaper global competitors, Australia’s car industry never stood a chance.  It certainly did its job to help secure an industrial base in a less specialised world, but the world has changed now, it’s one big supply chain and Australia has to sell into it and buy from it.

Mitsubishi is gone (mind you, I know from first hand experience what crap cars they built), Ford is all but gone, Holden is preparing to go and Toyota may not be far behind. There were almost 44 million vehicles manufactured globally in the first six months of 2013: more than 10 million in China, more than five million in the US, Japan close behind, then Germany, South Korea, India, Brazil, Mexico at about two million each. Australia made 94,000 vehicles in that time and ranks 30th out of 39 car-manufacturing nations, alongside Hungary and Austria.  Are we still surprised…?

Fact of the matter is, to continue making cars would need more oil and more money.  And both those commodities are in short supply.  Even the US Government is selling its shares in GM, at a loss of $10.5 billion!