Overview of Australia’s Automotive Capabilities
Australia stands out as one of the select few countries equipped to independently design and manufacture cars at a significant scale. The automotive sector in Australia extends beyond production, with car sales playing a pivotal role in both the Australian Automotive Industry (A.A.I.) and the broader national economy.
Dual Sectors of A.A.I.: Production and Car Sales
The A.A.I. is intricately divided into two core sectors—Production (Manufacturing) and Car Sales (Import-Sales). Both sectors contribute equally to the overall performance of the A.A.I. The Manufacturing sector involves market conditions in which Australian manufacturing businesses engage, producing vehicles and related products with the primary goal of maximizing profits. On the other hand, the Sales sector encompasses the market conditions in which car sales businesses operate, focusing on the sale of cars and associated products with the same profit-driven objectives as their manufacturing counterparts.
It is crucial to emphasize the distinction between these two sectors within the A.A.I. They entail different market structures, business strategies, and competition conditions. Consequently, a thorough analysis of each sector necessitates the development of two distinct economic models—one for Manufacturing and another for Car Sales.
1.1 Analyzing the Manufacturing Sector
Oligopoly in Australian Automotive Manufacturing
The Manufacturing sector in A.A.I. is characterized by oligopoly, given that only two organizations—Ford and Holden—produce cars in Australia. This section delves into the competition methods and pricing strategies employed between these two major players.
Characteristics of Oligopoly
Exploring the “sticky” nature of prices between competitors and the synchronized pricing policy changes, this section introduces key concepts, setting the stage for the subsequent development of a Game-Theory model.
1.2 The Game-Theory Model for Oligopoly
Understanding Pricing and Competition Policies
The Game-Theory model elucidates how firms in an oligopolistic market structure, such as Holden and Ford, forecast competitors’ pricing and competition movements. High and Low pricing policies are examined within the context of this strategic model.
2. Analyzing the Import/Sales Sector
Monopolistic Competition in Australian Automotive Sales
Examining the dynamics of importing and selling vehicles, the Sales sector operates under monopolistic competition. This section focuses on the short-run and long-run phases, shedding light on competition characteristics and outcomes unique to this market structure.
Impact of Manufacturing Costs on Sales
Highlighting the correlation between manufacturing costs and the pricing of vehicles for sale, this section emphasizes the role of cost analysis and cost management in the Monopolistic Competition Market Structure.
Short-Run and Long-Run Dynamics
An exploration of the common stages—economic profits, losses, and equilibrium—provides insights into how firms in the Sales sector navigate short-term and long-term market conditions.
Conclusion
Navigating Opportunities and Challenges in the Australian Automotive Industry
In conclusion, the Australian Automotive Industry faces challenges, particularly in the absence of government support. Nevertheless, the potential for competition and profit maximization persists. The decision to move overseas may not always be the optimal choice for manufacturing businesses, considering the sector’s substantial contribution to the Australian economy. Each business within the industry must define its market structure, allowing for clear goals, strategies, and policies. Ultimately, the market mechanism plays a pivotal role in shaping competition strategies, pricing policies, and overall success within the dynamic landscape of the Australian Automotive Industry.
