Global car trends an opportunity for South Australia
Changes in global car-making trends are an opportunity, not a threat, says Prescott Securities chief economist Darryl Gobbett.
In his annual “State of the Economy” assessment for Prescott clients, Gobbett said demand for commodities and components by the ever-expanding global car makers provided opportunities that counter-balanced the declining production numbers at places such as Holden.
“The global car market is a very imprtant one in the context of South Australia,” Gobbett told the 200 clients and advisers at the Crowne Plaza.
“In 2012 China made almost 20 million cars – up 12 per cent on the previous year; we made 200,000 – down 7 per cent.
“South Korea, India and Brazil are also expanding.
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“China’s figures are against a backdrop of having 85 cars per thousand people. In Australia that figure is almost 900 and in the USA about 800.
“Imagine of China’s car ownership levels get to around half of ours; say around 380.
“That’s what were facing in terms of changes to the motor vehicle industry.”
It is this rising demand that Gobbett sees as an opportunity.
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“My point is, let’s not worry about it; let’s look at the opportunities that are there.
“For example, what if half of those Chinese that are buying those extra 300 cars per thousand – what if they want leather seats?
“That’s the opportunity; the commodities, the components.”
Gobbett said other economic trends suggested the low cost of manufacturing in China would start to rise.
He cited trends in the falling costs of energy in the USA as it sources natural gas as an indication that in some areas the cost of manufacturing in the US had become comparable to those in China.
Local manufacturers, however, still have a battle at hand with the high Australian dollar.
“If you think the world is going to keep growing and want our commodities and resources, then get used to the idea that Australian dollar is staying above 90 cents, probably in the 90-95 range.”
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