Holden’s future as an Australian-based car maker rests on more than just government subsidies, an international industry overview shows.

With the industry under cost-of-production pressures from emerging economies such as China and Thailand, our access to natural resources could become a key advantage.

The Global Auto Industry’s Balance Of Power Shifts To Emerging Markets was published Monday by international business analysts McGraw Hill Financial in the United States.

It shows dramatic shifts in the industry which pose threats to, and opportunities for, Australia.

“The global auto industry is in the midst of dramatic growth and change, the likes of which it hasn’t experienced since the industry’s inception,” the report says.

“Although annual vehicle sales in the world’s mature auto markets have mostly plateaued, a new set of emerging markets–with larger and younger populations, rapidly growing economies, and low vehicle-ownership rates–have become the engine for growth.

“To serve these markets, automakers are in a grand race to set up local production, tailor vehicles to the needs of local consumers, and increase sales, market share, and profits in these areas.”

The author of the report, McGraw Hill Financial’s Director Automotive Industry Analytics Timothy J. Dunne, told InDaily this week Australia’s car makers have to look beyond the single issue of costs.

“Australia has a rich auto production history, but its industry is now competing not just locally, but regionally against the forces of demographic trends and geo-economic practicality,” Dunne said.

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“Thailand is a good example – I lived there for more than a decade, so I have some insight into what is happening.

“The local population is three times that of Australia, the government promotes automotive production, wages and taxes are low, the country belongs to the 500-million-person ASEAN Free Trade Area, and Thailand is optimally-located to serve as a production center and export launch-point for Asia.

“It has a lot going for it.”

The California-based analyst suggests Australia has to look at its strengths  maintain an industry presence here.

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“Certainly, Australia does have advantages of its own.

“Product quality is generally higher in Australia, it has a comparatively well-educated workforce, technologically-advanced industries, and access to vast natural resources.

“The task may be to leverage these advantages to offset the challenges the country faces in terms of higher wages, taxes, a smaller population, and distances from potential export destinations.”

As the report points out, countries that are rich in natural resources – such as Australia – have a card to play when negotiating global auto deals.

“Efficient mass production of modern vehicles might be among the most challenging manufacturing pursuits in business today.

“Not only does it require enormous capital investment, tens of thousands of man-hours, and the coordination of hundreds of interdependent entities; it demands an in-depth understanding of and access to most of the elements on the periodic table, including such precious metals as aluminum, magnesium, titanium, iron, nickel, copper, zinc, silver, tin, gold, and platinum, among others.

“To be sure, producing vehicles in the future will depend largely on a company’s (or country’s) ability to secure these natural resources.”

The McGraw Hill report shows why governments are so keen to establish – or keep – car-making industries.

“Perhaps no other industry can do as much for an economy as auto production, which can spur direct and indirect job creation, infrastructure development, and research and development, while promoting supply chain creation, and generating tax-revenue.

“Manufacturing a new model line, for instance, can cost from $500 million to $1 billion (or more), including land acquisition and construction costs; tooling, vehicle design, and engineering; powertrain development; regulatory certifications; and salary and administrative expenses.

“All of this investment occurs before a manufacturer produces a single vehicle. As a result, it is not surprising that local and national governments welcome and support automakers that want to manufacture passenger vehicles locally.”

On the plus-side for Australian workers is the “build where you sell” principle.

“Automakers typically prefer to build production facilities in or near the markets where they sell their vehicles as a way to increase efficiency, lower costs, and customize offerings to local preferences,” the report says.

Tim Dunne told InDaily he expects Australia to keep manufacturing around a quarter of a million cars per year between now and 2020.

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The report concludes that while the new car makers will enjoy their rise to prominence, there are risks.

“The global auto industry could face far more change than stability over the next several years, at a pace it hasn’t experienced since the first car rolled off the assembly line a century ago.

“Rising vehicle sales in emerging markets are helping to solidify these new players’ position in the global auto market.

“To boost profits and market share in these areas, automakers will need to ramp up local production and design vehicles that meet new buyers’ needs.

“The evolving industry faces many hurdles, including hefty capital investment and risk, significant environmental concerns, and strong competition for resources. Automakers’ ability to successfully navigate these and other challenges could determine who comes out on top in tomorrow’s global auto market.”

Read the full report here.