The announcement that Holden was withdrawing from the Australian car market was presented by the media as a huge shock and the death of an Aussie icon, but it was a pragmatic and inevitable result that should have surprised no one.
Up to the early 2000s, Holden was the number 1 brand in Australia, riding high on the back of Australia’s long term love of large cars. In 2003 it had over 40 per cent of the 200,000 per annum large car market, and still traded on the “Football, Meat Pies, Kangaroos and Holden Cars” marketing from the ‘70s.
The Holden versus Ford tribalism was fuelled by motor racing rivalry and family nostalgia about what car brand they grew up with. The locally built Commodore model was still the typical family car, and the Australian government and General Motors (Holden’s American parent company) continued their financial backing of Australian vehicle manufacturing.
Ten years later, past the Global Financial Crisis of the late 2000s, the taste of Australian buyers had changed, as had the appetite of the General Motors boardroom in Detroit for propping up the Australian arm of their company.
Australian buyers were now succumbing to the ‘lifestyle’ marketing lure of Sports Utility Vehicles (SUVs – taller, higher riding wagons) and sales of large family cars like the Holden Commodore were falling rapidly. Holden was able to sell the Commodore in the USA and the Middle East for a short period, but the world had moved on from large sedans and wagons and embraced the SUV.
Holden’s response to the SUV demand could not have been worse. Instead of building a SUV model in Australia, it manufactured the small sized Cruze, at a time when the small car market was beginning to shrink. General Motors also miscalculated when they popped a Holden badge on uncompetitive poor quality models, built in one of the other places in its global empire.
Holden’s main competitors were on the ascendancy. Toyota became the number one selling make in 2003, and has been extending its lead ever since. Its sales plan was to identify every segment it wanted to compete in and dominate everyone. Ford came out of the GFC a leaner company, still with product issues, but more financially secure than General Motors.
2017 saw the closure of Holden manufacturing in Australia, shortly after the Coalition government declared motor industry subsidies as corporate welfare gone too far, with Treasurer Hockey goading Holden to declare its intentions to ‘either be here or not’. An offer of a $1 billion government subsidy to continue manufacturing was not enough to encourage General Motors to keep its Australian factories open.
In 2019 Holden just managed to scrape into the top 10 brands, selling just over 43,000 cars. The writing was on the wall.
In the global General Motors empire, Holden was an outlier with a diminishing business case in a car market with multiple issues.
Australia is a right-hand-drive country at the far end of the globe in a predominately left-hand-drive world. The Australian car market is small in global terms (about 1 million new vehicles a year) and over-subscribed with too many brands completing for those.
The excess of competing brands is a consequence of the Button Car Plan of the mid 1980s – the Hawke government scheme to consolidate the car manufacturing industry and lower import tariffs on imported vehicles and expose the local manufacturers to increased competition. Thirty years later local manufacturing was completely unviable and there are more car brands in Australia than the USA, competing for a fraction of the comparative sales volume.
Given that General Motors has been pulling out of the remaining right-hand-drive markets like the United Kingdom, Europe, Japan and South Africa for the last two years, the availability of right-hand models from other parts of the General Motors empire to sell in Australia basically evaporated. Operating at a loss for most of the last 20 years would have made it an easy decision for General Motors to bail out of Europe.
At the dealership level, large metropolitan Holden dealers that sold 200 cars a month a dozen years ago have been struggling recently to sell 20 cars a month. Profit margins are thin, and cashflow is needed to pay for expensive floorspace. Without a competitive product range to offer, there was no motivation for prospective buyers to enter a dealership.
Nostalgia on its own wasn’t enough to get buyers into these Holden showrooms anymore. The days of buying a Holden because your family had one when you were growing up are long gone. The plethora of excellent Japanese and Korean cars available and European luxury cars bought on low interest finance helped sever that link.
And it was doubtful that many of the members of the various Holden clubs interviewed by the media after the withdrawal announcement have bought a new Holden recently. Even the ‘race on Sunday, sell on Monday’ of days past doesn’t resonate anymore, with V8 Supercars having no connection with what was available in the showroom.
The withdrawal of Holden is sad for the staff and the dealers, but this the free market writ large. There was always going to be winners and losers, and for many, Holden was an unexpected loser. But at the end of the day the numbers just did not stack up to the Detroit masters, and even icons had to pay their way.
And by the way, the “Football, Meat Pies, Kangaroos and Holden cars” jingle was a reworded Chevrolet advertisement.
By his own admission, Greg Smart was born 40 years old and is in training to be a cranky old man. He spends his time avoiding commercial television and bad coffee.