Labor backs auto funding to 2021

Government support for the Australian automotive industry is set to become a political battleground once more, leading into the next federal election.

The Labor Party has reaffirmed its support for the Automotive Transformation Scheme (ATS) continuing until 2021. That position is in direct contrast to that of the federal coalition government, which says the ATS will finish up early in 2017 after the departure of Australia's three current local car manufacturers Ford, Holden and Toyota.

Sticking by that would allow the government to bank nearly $800 million allocated to the ATS out to 2021.

A federal election is due by October 2016.

After deciding at its recent national conference that it would redefine its policy on automotive assistance and the ATS, shadow industry minister, senator Kim Carr (pictured), made clear the ALP's attitude at the Australian Automotive National Summit in Canberra today.

"We cannot pretend that hard times are not ahead," Carr told the summit. "But still I say: I am confident that there is a future for Australia's automotive industry.

"I know of companies that want to expand and invest. So does the government.

"If new investment can be attracted while existing capabilities are preserved, there is no reason why the industry can't rebuild and survive."

The speech follows on from yesterday's tabling of an interim report by the Labor-dominated Senate Economics References Committee, which Carr chairs, that recommended the ATS be redefined and provide greater support for the suppliers that will attempt to survive here beyond the departure of the big three.

Carr told the summit the ATS would form a component of a new automotive policy the ALP would develop.

"I am confident that the recommendations in this report will help Australia attract the new investment that is vital to securing the future of the automotive industry in Australia," he said.

ALP support for the ATS to be recast and run its full term will come as a boost to would-be local car manufacturer Ethan Automotive, which has a business model reliant on supplier technology to build up to 30,000 vehicles per annum in Australia.

But the end of the ATS in 2017 would have scuppered that plan because potential suppliers would not have had access to the funding the scheme provides.

Ethan has an application before the industry department to be recognised as a motor vehicle producer (MVP), which if approved could extend the life of the ATS as it is currently structured.

But as reported recently here, federal industry minister Ian Macfarlane said the ATS would close in 2017 even while acknowledging Ethan's approaches.

"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.

The $3 billion, 10-year, ATS is intended to encourage investment and innovation in the Australian automotive industry. The ATS provides assistance to participants for the production of motor vehicles and engines, and for investment in eligible research and development (R&D), and plant and equipment.

The ATS is focused on innovation, providing assistance payments of up to 50 per cent of investment in eligible R&D, while investment in plant and equipment receives assistance payments of up to 15 per cent.

The ATS provides capped assistance for investment in R&D, plant and equipment, and production, as well as uncapped assistance for production. Capped assistance is set at $1.5 billion for Stage 1 (2011 to 2015) and $1 billion for Stage 2 (2016 to 2020). Remaining uncapped assistance is provided for the production of vehicles from 2011 to 2017.

There is $900 million remaining in ATS capped assistance between 2015-16 and 2020-21. According to the budget the government expects to spend only $105 million between 2014-15 to 2020-21 as a result of reduced demand for the program, which would provide a saving of $795 million over seven years from 2014-15.