A Story for the Australian Automotive Industry in this year

Introduction to the Topic

Australia is one of only a few countries with the capabilities to design cars from scratch and manufacture in significant volumes. Car sales in Australia are also an important factor of the Australian Automotive Industry and the Australian Economy in total.

The Australian Auto Industry (A.A.I. in short) can be divided into two interrelated sectors, the Production ( Manufacturing) sector and the Car Sales (or Import-Sales) sector, both equally important for the total performance of the A.A.I. On one hand, the Manufacturing sector refers to the market conditions under which Australian Manufacturing businesses compete, by producing vehicles and related products, with the main aim of maximizing profits. On the other hand, the Sales sector refers to the market conditions under which car representative sale businesses compete, by the sale of cars and related products, having the same aim with businesses within sector one.

It is very important to state the distinction between these two sectors within the A.A.I., as we will be talking about two different market structures, business strategies, competition conditions, e.t.c. In order to analyse these market structures it would be appropriate to develop two economic models, one for each A.A.I. sector.

1.1-Analyzing the Manufacturing Sector

There is only one market structure that can best describe the market conditions in the Manufacturing sector if A.A.I., this is Oligopoly. As there are only two organizations that produce cars in Australia, and these are Ford and Holden, the competition methods and pricing strategies are based between these two organizations. The following economic model shall help define the competition and economic conditions for the Australian Automotive Manufacturing market.

The first important characteristic of Oligopoly that needs to be stated is that prices between competitors tend to be “sticky”, which means that they change less frequently than any other market structure. This statement will be explained in more detail later on, when we will be developing the Game-Theory model, as it is a very important concept of competition. The second most important characteristic is that when prices do change, firms are likely to change their pricing policies together. These two characteristics can boost up competition within the market. Firms will either try to match rivals’ price changes or ignore them. This is depended on the Game-Theory that is explained bellow.

However, the recent market conditions for the Australian Automotive Industry and the actions of the Australian Government have worsen the competition conditions and possible pricing options available for firms in the market. The production and maintenance costs for a manufacturing business in Australia are already high and rising, mostly due to lack of economic resources and advance of technology. That is, as Holden and Ford try to compete each other, given that prices tend to be “sticky”, they are forced to focus on technological advantage and marketing. Both of these business sectors produce high costs. Furthermore, the Australian government has made it clear that is unwilling to further subsidize automotive organizations in the market. All these factors stated above produce a negative effect on the competitiveness of both firms. In other words, rising costs alongside with decreased revenue push firms in experiencing lower and decreasing levels of profitability.

Profitability and the level of competitiveness are highly interrelated in an oligopolistic market structure, being the two most important factors, alongside with product differentiation, in the competition policies that the firms follow. When we say that the level of competitiveness of a firm is very low, we mean that the firm cannot react effectively to any price changes or competition changes or even changes in production costs. This may leave the firm depended on its’ competitor’s pricing and competition actions, not being able to affect the market competitiveness at all. The firm is then exposed to external danger and can be pushed out of the market, or even worse to shut production and declare bankrupt.

1.2- The Game-Theory Model for Oligopoly

The Game Theory model is used to explain the pricing and competition policies of firms in an oligopolistic market structure. Furthermore, it can show the few different competition policies based on pricing that the two firms can follow, that is High and Low as stated above. All firms in this market structure follow a Game-Theory model, although it is surely more detailed than our example, in the process of trying to forecast competitors’ pricing and competition movements and also keep track of the competition levels in the market and market share. But how does this happen?

For example, let’s say that there are four different fields, each divided in half. These fields represent the pricing strategies that Holden and Ford may use in the process of competing each other. Field A and C represent a High-Pricing policy for Holden, while fields A and B represent a High-Pricing policy for Ford. Lastly, fields B and D represent a Low-Pricing policy for Holden, while fields C and D represent a Low-Pricing policy for Ford. When both firms decide to follow a High-Pricing policy they share a profit of, let’s say, $12 million. If Holden decided to move to a Low-Pricing policy it will experience a maximum of $15 million profit, while Ford’s profitability will fall to $6 million. The exact opposite may also occur, while if both firms decided to follow a Low-Pricing policy they would realize a maximum of $8 million of profit.

What we can identify from the above example is that firms in an oligopolistic competitive market rarely change their pricing policies because this may produce a negative effect on their profitability levels. However, Holden and Ford, being the only two firms in the Australian Automotive Industry, they will focus on competing through product differentiation and marketing. That is, they will try to compete by differentiating their products, for example by producing vehicles with different features, or even base their production on technological advantage. Marketing plays an important role here, as it is the main tool that delivers and connects the customer with product. For example, if Holden introduces a new driving technology that improves driving experience and safety and produces this technology alongside with a newly designed vehicle, it is quite likely that Holden will effectively differentiate its newly designed vehicle from a relative vehicle of Ford and lure more customers in the store. Holden may also use marketing techniques to deliver this technology to the public, in the form of knowledge; hence try to boost sales without changing its pricing policy. However, it is important to state that this new technology may produce higher production costs, if not evaluated properly; hence Holden can only rely in increasing its market share to gain greater profitability. The sales part, however, will be analyzed in more extend within the next chapter of this report.

The Game-Theory is not just a theory for the Automotive Industry in Australia, it’s a fact. It shows us that auto manufacturers in Australia have based their competition strategies on all the factors stated above and as much as they possibly can on pricing strategies. They may advertise that they have low prices, but in fact their prices are very stable. If we have a close look at Holden’s or Ford’s websites, we will identify that there is a huge variety of products and each firm competes in that. However, the new market conditions stated before have greatly changed the way auto manufacturers think of the future and this in turn may change their pricing and competition policies, or even determine their existence in the market.

2.1- Analyzing the Import/Sales Sector

While the auto manufacturers are considered to be operating in an oligopolistic market structure, importing and selling vehicles or relative products is a different story. The import and sale of vehicles is the second and equally important business sector of the Australian Automotive Industry. There are many different car selling businesses and we shall only consider first-hand sales, as second-hand sales in general are not included in economics and more specifically in GDP measurements. To enter the industry hard at all as there are not many barriers to entry, however someone who is interested needs to consider of the high costs in setting up an automotive dealership. All businesses in this market are mostly based on product differentiation to compete and while prices are not “sticky”, pricing competition is set up by the market mechanism and tends not to be considered a regular phenomenon. Lastly, cost analysis and cost management play a very important role. All of the above characteristics refer to the Monopolistic Competition Market Structure. In this market structure we will focus on two phases, the short-run phase and the long-run phase, each with different competition characteristics and outcomes.

An important factor that we need to state here is that when the costs of developing a vehicle in the manufacturing sector rise, then the cost for selling the vehicle for a dealership may rise as well. This is always depended of course on if the vehicle was produced in Australia and if it was produced overseas, under what economic conditions was it produced. Price might be “sticky” for manufacturers, however prices will change much easier in this sector if needs be. Here firms will change their pricing policies if costs either rise or fall and this is always depended on the market mechanism. The amount of competitiveness along with the amount of price elasticity of demand will depend on how many rivals the monopolistic competitive firm will have to face.

In such market the following situation is very common, a situation that helps us distinct between short-run and long-run:

Stage One

In this stage the firm experiences economic profits. However, this fact will draw new firms in the market causing the profits to be competed away.

Stage Two

The economic losses indicated in this stage will cause many firms to exit the market, as they cannot keep selling under these market conditions.

Stage Three

In the final stage, the market clears-up, or reaches equilibrium point. As all firms that needed to exit the market have done so, the market mechanism comes to the point where no economic profits/losses are realized by the firms. This is the point where the market is most stable.

Studying the situation above we can identify one very important fact for any monopolistic competitive firm in the Australian Automotive Industry/ Sales sector. That is that in this market structure, in the long run, firms will realize only normal profits and the market mechanism will eventually reach an equilibrium point. Hence, in the long-run firms will compete mostly through product differentiation. However, in the short run firms may experience economic profits or losses and this is what causes firms to enter or exit the market and “shows” firms how to compete and when to apply pricing competition policies.

Conclusion

The Australian Automotive Industry may be experiencing rough market conditions, mostly because there is no more government support; however competition and profit maximization is still possible. Thinking of moving overseas is not always a good option for the manufacturing businesses, as the Australian Economy needs the manufacturing sector, as it represents a reasonably big part of GDP.

Market competition conditions are well defined for every manufacturer or car dealership, hence any business in the market ought to use the available to them competition strategies and achieve higher market share and profitability level or stabilize its profitability levels. Either way, these are the main goals for almost every profit-motivated business in any market type under any market structure. However, every business ought to define the market structure that is operating in, so that it can then clearly define its goals, strategies and policies. The market mechanism is in all cases responsible for all the above strategies and most of the cases responsible for setting up pricing policies or indicating pricing and marketing strategies.

Pros and Cons of Becoming an Auto Mechanic in this year

There are various positive and negative realities of becoming an auto mechanic. You need to be familiar with all of them before becoming 100 percent committed on pursuing this profession. By being involved in auto shop courses and working as a mechanic apprentice early on you will gain invaluable information that will help you make a thought out choice. In this article we aim to showcase some significant advantages and minuses of working as an auto mechanic and set you on the right path to pursuing this subject further.

Pros:

1. Doing work on your own vehicles.

As a mechanic you’ll be able to work on your own personal vehicles which means you will save money by doing the work yourself. Additionally, you can buy and repair older vehicles and sell them for a profit.

2. Great place to begin for launching your own shop.

After you obtain the essential expertise you will have the opportunity to open your own shop. This will require not only technical skills but additionally behavioral skills that you will need a lot when dealing with clients.

3. Employment stability.

As increasing numbers of individuals are putting off the purchases of new vehicles their older cars need more repairs and maintenance. By entering this field, you can expect to always have a place to work provided that you possess the essential skills.

Cons:

1. Expensive resources.

The equipment required for the career are costly. Initially the majority of your wages will go towards your tool assortment. It is a sizable investment but will pay off for itself eventually.

2. Entry-level salary is fairly low.

When coming into the field of automotive repair, you will notice that your income will not be very high. Dependent upon your location and past experience the earnings may vary individually for each person but tend to be anywhere from $8 to $15 per hour. If you need a high paying job instantly, this may not be the career path for you.

3. Long hours and continuous training.

Fast paced mechanic shops are generally filled with cars and remain open to satisfy client expectations. Anticipate to work nights and weekends. Furthermore, with all the changing technology in cars a mechanic will need to continually retrain themselves. As a mechanic you will also have to retake the ASE examinations every 5 years in order to maintain your certification. This training costs money and typical courses cost between $500 to $2,500.

Uses Of Automotive Equipment And Tools in this year

Automotive equipment and tools are a very important part of the automobile industry. They can range from simple hand held devices to large structures that can even lift a heavy truck. The uses of these equipments in the world of automobiles cannot be undermined. For carrying out repairs, for changing a tire, for lubricating, for servicing, for charging up the battery, and for cleaning the vehicles, these equipments are very important.

Here Is A Brief Note On Some Of The Uses Of These Equipments.

Automobile Equipment Usage

* Automotive Lifts: Hydraulic lifts are very common in the industry and are used in showrooms, repair shops, and automobile factories. They generally come in the form of a platform fixed on a zigzag leg that can be raised or lowered as required. Heavy vehicles can be raised by the use of this equipment. These are how cars reach the first or second floor of a showroom or how the repairs to the lower part of vehicles are carried out in a mechanic’s shop. These lifts can be of different types like motorcycle lifts, runway lifts, drive on lifts, in-ground lifts, etc.

* Lubrication Equipments: As the name suggests, these are used to lubricate parts of the vehicle. There is a long list of lubrication equipments available and each is used for different lubrication purposes. Oil and grease reels, grease guns, oil drains, and oil and grease pumps are all examples of such commonly used equipment. Blacrank is a good brand when it comes to these equipments. Blacrank oil pumps are indisputable masters of the group.

* Compressors: Air compressors are used to do various works on automobiles. Generally, air compressors give additional pressure to drive in screws and give more power to tools like wrenches and nail guns. These are also used to remove dirt from the vehicle.

* Service Equipments: A vehicle needs to be serviced from time to time to ensure its proper running. This is where service equipments come in. These are battery chargers, fuel transfer device, brake fluid exchangers, coolant service equipment, tire changers, etc.

* Reels: These come in different shapes and sizes and are an important member of any automotive equipment list. Reels could be air reels, exhaust hose reels, grease reels, etc. Reels help to keep the pipes and hoses in place and also to extend its life. They can be easily reeled out to the required size and stored by reeling back.

* Jacks: Jacks are important not only in the shop but also for every vehicle owner. They enable the person to lift up the vehicle for the purpose of changing tires or doing some emergency repairs on the vehicle.

The list of automotive equipment is quite long and their uses quite large. Companies who sell such equipments also deal in car parts, thus making the store a one stop place for all things related to automobiles. Nowadays, there are thousands of online stores selling these equipments making them more accessible to all in need.

The US Automotive Industry and The Big Three in this year

We have a proud car culture in the United States but, surprisingly, not many people know too much about this country’s automotive history. For this history lesson, we are focusing on the automotive “industry” rather than the history of the automobile itself.

When It All Began

In the 1890s, the American automotive industry began and, thanks to the use of mass-production and the large size of the domestic market, quickly evolved into the largest automotive industry in the world (though this title would be taken from the U.S. by Japan in the 1980s and then from Japan by China in 2008).

The U.S. motor vehicle industry actually started with hundreds of manufacturers, but by the end of the 1920s, three companies stood apart from the rest:

  1. General Motors
  2. Ford
  3. Chrysler

The Big Three

These three companies continued to prosper, even after the Great Depression and World War II. Henry Ford began building cars back in 1896 and started the Ford-Motor Company in 1903. Ford utilized the first conveyor belt-based assembly line in 1913, improving mass production of its Model T. The assembly line decreased costs significantly and the Model T sold so well that it propelled Ford into the largest automobile company in the U.S.

General Motors was founded by William Durant (formerly a carriage maker)n in 1908. In the first couple of years, GM acquired Buick, Oldsmobile, Oakland (later to become Pontiac), Cadillac, and a number of other car companies. Durant also wanted to acquire Ford but Henry Ford opted to keep his company independent. Having become a little to “acquisition-happy,” Durant over-extended the company and was forced out by a group of banks who took controlling interest in the company. Durant then teamed up with Louis Chevrolet and founded Chevrolet in 1913, which became a quick success. Durant retook majority control in GM after acquiring enough stock and GM acquired Chevrolet in 1917. This did not last long, however. Durant was forced out again in 1921. In the late 1920s, GM overtook Ford as the largest automaker.

The former president of Buick and a former executive of GM, Walter Chrysler took control of the Maxwell Motor Company in 1920, revamped it, and reorganized it into Chrysler Corporation in 1925. Chrysler acquired Dodge Brothers in 1927 and, in 1928, introduced the DeSoto and Plymouth brands thanks to the dealer network and manufacturing facilities that came with the Dodge acquisition. By the 1930s, Chrysler overtook Ford and became the second largest automaker.

1950s and Beyond

By 1950, America produced almost 75 percent of all automobiles in the world. At the start of the 1970s, however, U.S. auto companies (especially the Big Three) were severely affected by increased competition from foreign auto manufacturers and high oil prices. In subsequent years, companies bounced back occasionally but the crisis reached its pinnacle in 2008, prompting Chrysler and General Motors to file for bankruptcy reorganization and be bailed out by the federal government. While Ford was also affected by the crisis, it decided to power through on its own and did not take the bail out. We actually have a lot of respect for Ford as a result of this. They did not take the easy way out.

The year 2014 saw saw the biggest (seasonally adjusted annualized) sales in history with 16.98 million vehicles.

Characteristics of a Good Automotive Repair Mechanic in this year

Knowledgeable on various auto parts.

This is perhaps the most basic characteristic that any auto mechanic should have. Lots of different auto parts are out in the market today. And because we, as car owners, do not necessarily possess the sufficient knowledge when it comes to vehicle parts, we will inevitably depend on the expertise of our mechanic. A simple trick to determine if your chosen car specialist really knows his business is to ask him to differentiate a few parts and gauge whether he is confidently answering your question or is just making his way around.

Diverse background on automotive repair experiences.

Years ago when the makes of our vehicles were much simpler, any mechanic would have been okay. But with today’s high-tech and complex vehicles including family sedans, sports and luxury cars, SUVs, and pick-up trucks, we need someone who has a diverse background in automotive repair services. Mistakes have no room when it comes to automotive repair as these will only make things even more costly. Choose a mechanic who has certifications of training programs and classes that he has attended. The mechanic’s time spent in studying as well as in the actual practice of automotive repair is very advantageous for us car owners.

ASE certified to be an automotive repair professional.

Speaking of certifications, perhaps the most famous and widely recognized one, when it comes to professionals in the automotive industry is the ASE certification. Annually, an estimated 100,000 automotive technicians take ASE certification exams each May and November at over 750 locations.

With an ASE certification, we are assured that our mechanic has good background in all automotive services because an ASE certification requires a minimum of two years work experience in addition to passing a series of examinations that include Engine Repair, Engine Performance, Electrical/Electronic Systems, Brakes, Heating and Air Conditioning, Suspension and Steering, Manual Drive Train and Axles, and Automatic Transmissions for auto technicians alone. There are separate tests for those who want to be collision repair technicians, engine machinists, parts specialists, and others.

Furthermore, all ASE certifications have expiration dates which requires technicians to re-test every five years to keep up with technology and to remain certified.

Works in a reputable auto center.

Unfortunately, ASE certifications apply only to individuals and not to auto centers. However, an auto center with at least one ASE certified mechanic is allowed to display the ASE sign. Furthermore, an auto center that has 75% ASE certified mechanics among its employees are given the Blue Seal of Excellence from the ASE.

Aside from the ASE recognition, other signs that we should look for an auto center include neat and well-organized facility complete with modern equipment, courteous staff, and good policies (regarding labor rates, diagnostic fees, guarantees, etc.)

Highly recommended by family and friends.

Nothing can attest to the quality service that any auto center and mechanic can give than testimonials of our family members, relatives, and friends. Ask for referrals and recommendations. Local community organizations and business listings are also good sources of information.

Automotive Equipment and Tools For The Automotive Industry in this year

The automotive equipment industry deals with the production of every kind of tool and machinery that is needed for the manufacture, maintenance and repair of vehicles including cars and car parts. As such, the industry produces several different varieties of equipment starting from basic hand tools to more complex machinery.

Different Kinds of Automotive Equipment

Automotive workshops and garages will be unable to function without automotive equipment. Shop furniture, lifts, exhaust hoses, air compressors, lubrication equipment, electric and light reels, jacks, vehicle servicing equipment, fluid storage tanks and trans-air piping are some of the many different types of automotive equipment that are used by automotive manufacturing and automotive repair businesses.

Common Types Of Automotive Equipment

* Hand Tools: Automotive repair shops use several different types of hand tools for their repair and maintenance projects. Some of the commonest items include ratchet sets and wrench sets, crowbars (also known as pry bars), socket sets, screwdrivers, star and clutch-head drivers, hammers, pliers and wire cutters, electric drills, hacksaws and torque wrenches.

* Pneumatic Tools: Most automotive workshops now use pneumatic tools as an alternative to electricity powered motors because the latter is more prone to fire hazards. Such tools are powered by compressed air and are high powered versions of the more traditional hand tools. Common examples of pneumatic automotive equipment include air compressors that can be used to power a variety of tools including hammers, drills, ratchets and spraying tools.

* Availability of pneumatic equipment makes it easier for mechanics and technicians to undertake repair and maintenance work because they are powerful and easy to use. For example, a set of pneumatic shears can cut through sheet metal at a faster rate and leave behind a smoother edge when compared to traditional tin snips. Similarly, air hammers outfitted with chisel or punch bits have multiple uses. They can they be used for straightening dents. The chisel feature can be used to break rusted parts loose and the punch bits can be used to remove old rivets and bolts that are too difficult to take out by hand.

* Lifts: several different kinds of lifting equipment are used to lift and secure cars so that mechanics and repair persons can easily work under the vehicle. These lifting tools include both low-tech tools such as basic floor jacks, car ramps and jack stands as well as hydraulic lifts and floor jacks for better efficiency and performance.

* Vehicle Exhaust Removal Systems: vehicle exhaust removal systems are used to capture and remove harmful exhaust fumes to insure optimal air quality in automotive maintenance and repair facilities. These are mandatory equipment as per OSHA Standards in order to limit exposure to harmful vehicular emissions. Common vehicle exhaust removal systems include hose drops as well as reels.

* Lubrication Systems: Automotive lubrication systems include several different types of oil meters, ATF meters, gear lube meters, dispense valves and grease dispenses valves.

The Automotive equipment business is a very large and competitive business. Automotive repair businesses must buy equipment from reputable dealers for the best deals and performance levels.