Ethan: Feds still waiting for 'formal proposal'

Would-be Australian car-maker Ethan Automotive continues to battle for government backing, with federal industry and science minister Ian Macfarlane saying it has yet to deliver a “formal proposal” for him to consider.

This follows on from the South Australian state government’s rejection of an Ethan application for funding.

The start-up has countered Macfarlane’s comments by providing motoring.com.au with a list of meetings it has had with the minister and his department.

It has also supplied forecasts on its sales, production and sustainability to the department as required by its application to be recognised as a Motor Vehicle Producer (MVP) under the Automatic Transformation Scheme (ATS).

As previously reported by motoring.com.au, Ethan Automotive wants to start vehicle manufacturing in Australia in late 2018, about 12 months after the end of production by Holden and Toyota and two years after Ford close its local assembly plants.

Ethan proposes to build up to 30,000 vehicles annually — including passenger cars, sports cars and SUVs — based on a modular architecture. As a first step towards that plan was its purchase of Adelaide-based racecar builder West Motorsport in early 2015.

Ethan estimates the all-up establishment cost would be $1.5 billion, which it is seeking from both public and private sources.

However, it claims that once established, its business model, will be sustainable without government funding, unlike the big three that are about to depart, who couldn’t survive with taxpayer backing.

In an interview with the ABC current affairs program 7:30 on August 4, of which only a small segment went to air, Macfarlane was asked if he thought Ethan Automotive’s proposal could succeed where Ford, Holden and Toyota had failed.

“I’ve met with the potential directors of Ethan Automotive,” Macfarlane was quoted as saying in a transcript supplied to motoring.com.au by his offices. “They’ve put forward a proposal. They’ve said they’d come back to me. They haven’t as yet.

“I understand they are in discussions with my department and if they put a proposal on the table to actually build cars in Australia, rather than just talk about it, then obviously the government takes that into consideration and the department will provide me with advice on it.

“But at the moment, there is no formal proposal from Ethan Automotive.”

Later he added: “The reality is that there is no firm proposal from Ethan Automotive, no funded proposal from Ethan Automotive, to build motor vehicles in Australia.”

Ethan says its contact with the federal government includes an October 30, 2014 meeting in Canberra with the minister that was also attended by a number of Tier One auto suppliers which supported the Ethan business model.

In May this year Ethan lodged its application for MVP status under the ATS.

In early June newly-appointed Ethan Automotive chief operating officer Matthew Newey reviewed the company’s business case, which the company says resulted in reducing “its reliance on government funding”.

On June 17 Newey met with industry and department officials responsible for the administration of the ATS to update them on the company’s business case. On the same day he met with a ministerial adviser to provide a full update on the company’s proposal.

Further information requested to support the ATS application was supplied to the federal government on July 6.

Granting MVP status is crucial to Ethan’s business case because it guarantees ongoing R&D and plant credits for suppliers under the ATS. As it stands now, funding cuts off when the last of the big three manufacturer shuts down, leaving more than $300 million in grant money unspent.

While Macfarlane acknowledged Ethan was in discussion with his department, he said neither the three current manufacturers or the components suppliers had approached the government about extending the ATS, therefore it would shut at the end of 2017 when car production stopped.

“Ford, then Holden and ultimately Toyota made the decision that it was just too difficult manufacturing cars in Australia and they would close. When they close, when the last Toyota or the last Holden rolls off the assembly line, the scheme will come to an end. But, that’s a decision by the car industry, not by the government,” Macfarlane said.

In a statement issued to motoring.com.au Newey said: “What we would like is access to the same fund as the other car-makers. This will enable us to support the faltering auto supply chain and help retain the auto manufacturing jobs and skills base in Australia.

“The financial modelling for the Ethan Automotive program is not reliant on government funds in the long-term, however, some support in the early stages is sought to progress our passenger car development and diversify our existing race car operation.

“Ethan Automotive’s business model is fundamentally different to the other car-makers in Australia.

“We will deliver our model by leveraging the skills, experience and capability of our Tier One suppliers.

“In essence, Ethan will use proven production methods that are used elsewhere in the world, but are not yet used in Australia.”

“Ethan Automotive remains committed to building cars in Australia and are continuing with to work with our supply chain partners to achieve this.”

Further reading:
Property and pollies behind Aussie auto-start-up
Ethan seeks taxpayer dollars
Global badge for Aussie industry relaunch