Boston, MA 12/17/2013 (wallstreetpr) – General Motors Company (NYSE:GM) announced recently that it is going to stop the manufacturing of vehicles in Australia in the year 2017. There is no doubt that the company will sell the cars there under its local brand name but it is going to import vehicles most likely from South Korea. It was a tough decision for the executives of the company to shut down the production of vehicles in a local area but nevertheless it was a good decision. It is becoming impossible day by day to profitably manufacture cars in Australia.
Earlier this year, the rival company of General Motors, Ford Motor Company (NYSE:F), took a similar decision which is followed by the decision of General Motors to stop manufacturing cars in Australia. The main reason for both the automakers taking this similar decision is the rise of Australian dollar against other currencies of the world over the past decade and also because of the recent fall of yen, the Japanese currency. These swings in currencies have made cars build in Australia less competitive in reference to the imported models.
There are many other factors that affect this decision. The most important of all is that the size of Australian auto market is relatively small and is of highly competitive nature.
The government has provided policy of subsidizing manufacturers of vehicles for building cars in Australia. This thing was propping up the auto manufacturing in Australia. Still, Ford decided to pull itself out of the market. This was because even with those subsidies, the company was losing money while it was gaining profits with imported models.
The same thing happened with General Motors last year. Even with the subsidy of more than $2,000 per vehicle, the company lost approximately $140 million last year. So, it is not possible for the company to continue with such losses.