This is why Ford Motor Company (NYSE:F)’s decision to shut down Australian manufacturing operations and General Motors Company (NYSE:GM)’s hesitance to invest further in the country look financially intelligent. Some Aussie consumers may be drawn to Australian-made products, which could result in lost sales for the companies. However, with only over a million cars being sold annually in the country, General Motors Company (NYSE:GM) and Ford should not gamble millions of dollars in potential losses.
In 2012, GM only sold 115,000 cars in Australia, while Ford Motor Company (NYSE:F) only tallied 94,000. Even as the overall market has grown from 2010 to 2012, sales have decreased by 18,000 vehicles for General Motors Company (NYSE:GM) over that time frame, and by 10,000 vehicles for Ford. Both companies are dealing with dwindling market shares in the country, and relying on new product launches to revitalize their Australian operations.
Toyota Motor Corporation (ADR) (NYSE:TM)’s decision to invest in Australia may prove to hurt the company — or boost its sales. Toyota’s launching 2 next-generation models specifically for Australia. However, with such a small overall market, the automaker’s upside is limited.
Looking Towards Tomorrow
The Australian auto industry should continue to grow in overall sales, while manufacturing could continue to dwindle as more companies pull out their operations. While attractive funding by the government may keep companies such as Toyota there, the long term points towards high operating costs driving manufacturers away.
Monitoring these trends will be crucial for investors looking to take advantage of the shifts in the market, which could include possible policy changes by the newly elected Australian government that address manufacturing costs.
Toyota Motor Corporation (ADR) (NYSE:TM) investors should monitor whether the company’s investment pays out in the form of increased market share and sales in the region.
Ford investors should see whether the company successfully shutters its plants by 2016. Expect Ford Motor Company (NYSE:F)’s sales and market share in the region to flatten out, with new product launches stabilizing those numbers.
Investors in General Motors Company (NYSE:GM) should watch for Holden’s decision after the upcoming election regarding investing in manufacturing operations in Australia.
All in all, while the auto manufacturing industry in Australia may be dying, overall sales are strengthening, and Toyota’s investment could position the company to marginally capitalize, while GM and Ford appear to be playing damage control.
The article Automakers’ Bumpy Ride in the Land Down Under originally appeared on Fool.com and is written by Ryan Guenette.
Ryan Guenette has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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