3 ms·

"Mass freight is just so cheap that location doesn't matter." It's not so much the cost, but the time. Distance from your suppliers and customers can matter a

"Mass freight is just so cheap that location doesn't matter." It's not so much the cost, but the time. Distance from your suppliers and customers can matter a great deal. If you have to keep higher inventory because of longer lead times, or have to suspend the line (or store unfinished cars) while you wait for a part revision from a supplier, it puts you at a big disadvantage when you're waiting weeks for shipping rather than days. Economies of scale is also an issue. In the absence of significant tariffs, it's hard to sustain an automotive industry that's only supplying a domestic market of ~24 million people. Countries like Canada and Sweden do sustain significant domestic automotive manufacturing, but they export a large portion of the cars to bigger markets. But you're correct, of course, about the exchange rate being the primary cause. The resources boom drove the AUD higher, and also increased the cost of labour.

nl 9y ago
but they export a large portion of the cars to bigger markets Which at $AUD1 = $US0.5 was happening pretty successfully, and even at 0.75 (or 0.8 like now) was possible. In the absence of significant tariffs Tariffs aren't the only form of government support, and are far from the best. In Australia we had significant tariffs on cars until the Button plan reduced them over a long period of time. It lead to low quality cars being produced in Australia, which were uncompetitive internationally and couldn't be exported. There are other forms of government support which are more effective, and could have been used in this case to keep the car industry going. Notably the car companies didn't ask for tariffs when campaigning for support. increased the cost of labour Not really, in South Australia.