SUV firms as Holden's second local model

The odds that a small SUV will be the second volume model line built at Holden’s Elizabeth assembly plant from 2017 are shortening dramatically as Commodore sales spiral.

But at the same time, there is a chance the VF Commodore could also continue to be built as a third model line to service the US police car market and the domestic ute market.

Both scenarios came into clearer focus today at the Detroit motor show, as Holden Managing Director Mike Devereux sought to clarify apparently contradictory statements to the media about future Holden’s manufacturing plans.

While General Motors International Operations chief Tim Lee told Australian media that only one of two post-2017 global architectures had been chosen, current GM North American boss – and former Holden chief – Mark Reuss said that both lines had been finalised.

As Mr Devereux explained it, both men were right; Holden has signed a co-investment scheme with the federal and South Australian governments to build cars based on two global architectures, but the boom in SUV sales is prompting a review of one of those choices.

Still certain to go ahead in 2015 is the second-generation Cruze small car based on the updated Delta II architecture. But the second line, thought to be a mid-sized car based on the Epsilon architecture, may now be replaced.

“We have a plan that we signed with the government of Australia that does define two architectures,” Mr Devereux confirmed.

“Could we change the second one if things continue to change? Yes we could.”

“We are evaluating … what is exactly the right thing to do on that second architecture. We have a mainstream plan that’s in a government document, in that contract, and that’s the current plan we are following.”

Mr Devereux said whichever way Holden opted to go, the decision would have to be made soon: “As far out as you have to plan this stuff at what point do you say ‘that’s our plan and even if get new information we can’t change’. We are right in that timeframe.”

SUV sales grew 25 per cent in Australia in 2012, while passenger car sales grew only 3.1 per cent.

To viably manufacture in Australia Mr Devereux has insisted Holden has to build two top-10 sellers. While no SUV currently fills that bill, their rate of sales growth suggests that will happen by the second half of this decade or sooner.

“(Holden is) forecasting out into the next decade, which makes the growth of SUVs in the last year quite an important data point to consider,” he said.

“We have pretty dynamic projections for what this market looks like and they look a little different to what they did 12 months ago. I don’t know if you predicted 27 (sic) per cent SUV growth, we didn’t.”

Mr Devereux spoke enthusiastically about the sales potential of small SUVs, citing the potential of the Barina-based Trax which Holden will import from Korea this year.

“I think the market is just going to explode for that,” he said.

The chances of vehicles being built beyond 2016 at Elizabeth based on the Commodore’s Zeta architecture depends on the sales performance of the PPV police car in the USA, and to a lesser extent the Commodore VF-based Chey SS sports sedan that launches there next month.

“We have some time on the export potential on VF to actually figure out what we might want to do post its Australian market lifecycle and whether that is a good business case,” Mr Devereux said.

Continuing with the Zeta ‘legacy architecture’ would also give Holden the chance to continue selling the unique Commodore ute in Australia, as well as potentially export it to the USA as a new-age Chev El Camino. That proposition depends on exchange rates.

Mr Devereux said he anticipated no issues with the federal government if Holden elected to change the second architecture it would build at Elizabeth.

“If we did change what we are going to build, we are only going to change it because we thought we could do more.”

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