Local automotive component suppliers and car makers Ford Australia, GM Holden and Toyota will retain $500 million of vital funding after Senate blocked proposed budget cuts to the Automotive Transformation Scheme (ATS) funding.
The Industry Minister said that this decision was made to ensure the automotive manufacturers can remain running until their own scheduled closure dates. Ford plans to cease local manufacturing towards the end of 2016, while Holden and Toyota will end towards the end of 2017.
Ford Australia believes they are on track to transform their business into the largest automotive employer and investor in Australia. Holden has said that the funding strengthens their commitment to local manufacturing until the end of 2017.
The funding will also help component suppliers to transition to new opportunities. Without continued funding, all automotive assembly in Australia ran a high risk of ending well before these announced dates.
What is the ATS?
The ATS is a government grant scheme to provide $1.6 billion in capped and about $348 million in uncapped cash for investment and production to eligible registered automotive participants in specific automotive categories.
Its aim is to encourage competitive innovation and investment in Australia’s automotive industry and to get it back onto economically sustainable ground.
The funding split is 55 percent to auto manufacturers and 45 percent to component makers. The ATS was established in January 2011 and will run until the end of December 2017.
The proposed budget cut and reinstatement
In May 2014, the Federal government proposed a cut of $500 million to the ATS funding.
Critics warned that this move could lead to carmakers closing earlier than they planned and it would make it harder for component suppliers to survive.
Federal coalition MPs, Victorian and South Australian oppositions lobbied for a reinstatement of the funding, by arguing that their seats were threatened by political fallout from the decision.
The Ai Group expressed the industry’s concerns to the Government, Opposition and Senate crossbenchers about the proposed withdrawal of $500 million. They highlighted the importance of honouring funding commitments made to the automotive sector to help in the transition towards a focus on new products and markets. They also emphasised the importance of promoting certainty and trust in governmental policy.
After 18 months of uncertainty, the Senate this week scrapped the budget cuts. This stopped the attempt to eliminate industry assistance under the ATS and ensured it will remain in place until 2017.