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Australian Automotive Aftermarket Association Australian Automotive Aftermarket Association Australia’s Innovation System Submission to the Senate Standing Committee on Economics The Australian Automotive Aftermarket Association Ltd (AAAA) is the national industry association representing manufacturers, distributors, wholesalers, importers, mechanical repair & modification services and retailers of automotive parts and accessories, tools and equipment in Australia. The Association has over 1700 member companies in all categories of the Australian automotive aftermarket and includes major national and multi- national corporations as well as a large number of Australian owned small and medium size businesses. The parts and maintenance sector of the $108 billion Australian automotive industry represents about $34 billion. AAAA member companies employ more than 30,000 people and export over $800 million worth of product a year. Suite 16, Building 3, 195 Wellington Road Clayton, Victoria 3168 AUSTRALIA 03 9545 3333 www.aaaa.com.au About AAAA The Australian Automotive Aftermarket Association (AAAA) is the national industry association representing over 1700 manufacturers, distributors, wholesalers, importers, mechanical repair & modification services and retailers of automotive parts and accessories, tools and equipment in Australia. AAAA members manufacture motor vehicle components, including: Products used to modify, maintain or enhance the performance of vehicles, including modifications for rough terrain, speciality products, safety, comfort, appearance, functional performance and body components. Products that are replaced regularly throughout the life of the vehicle as a result of normal wear and tear – e.g. filters, tyres, wiper blades, batteries and brake pads. Many AAAA member companies that manufacture in Australia also supply locally manufactured Original Equipment (OE) components to car manufacturers as replacement parts and accessories for fitment to locally built and imported vehicles, as well as to the independent aftermarket. Summary The skill base and competitive attributes of the automotive aftermarket are broad, reflecting the wide span of the production and distribution supply chain of the sector. Aftermarket components are provided through multiple channels: car producers, vehicle service, collision repair, retail outlets and direct to car owners. As a consequence the provision of components embraces many business processes including manufacturing, marketing and distribution of components. The capacity requirements include design, research and development, manufacturing, logistics and distribution, business development, marketing and export development. Products are frequently redesigned for different platforms and the sector is particularly skilled in niche markets and in best practice time-to-market design, manufacturing and delivery. Aftermarket manufacturers are innovative and nimble but the sector is owned by small and medium sized enterprises without dedicated testing facilities. We would like to see government playing a role in supporting innovation in the aftermarket to expand our product range and provide easier access into global markets. But as the situation stands today there is significant disincentive to automotive innovation in aftermarket production: 1. Testing of New Products ANCAP is part of the problem and not part of the solution 2. Australia’s Vehicle Standards Regulatory Environment Regulators are antagonistic to aftermarket modification despite the high reputation that Australian products enjoy overseas; domestically we are confronted with regulation without cause and without evidence. The lack of testing facilities and the absence of government acknowledgment that Australian aftermarket products are high quality and internationally regarded exacerbates this problem. State variations in in-service vehicle standards also hinder commercialisation of new products. 3. The Original Equipment Bias Government has been so focussed on maintaining our car manufacturing industry that innovation in the independent aftermarket parts sector has been ignored, despite many studies that confirm our Australian manufacturing technology advantage, high productivity rates, consistent export expansion and employment growth. We have a range of automotive support programs, centres of excellence, innovation and testing – none of which are geared to the automotive aftermarket. In fact these facilities are not only biased toward OE, these programs specifically exclude the aftermarket. The exclusion occurs because programs specify that the end-customer must be a car maker; these entry and eligibility pre-requisites require the component producer to be supplying to the OE market. We design, manufacture and supply to the retail sector, to vehicle repairers and modification service providers, direct to vehicle owners and fleet customers. New programs, designed to transition the OE supplier base should not create an unfair competitive environment for the Australian automotive aftermarket industry. 4. Parallel ANCAP Testing Stream for the Aftermarket We recommend that the Federal Government ensure that ANCAP establishes, as a part of its funding conditions, a parallel testing stream for modified vehicles available for the aftermarket on fair and reasonable commercial terms. Case Study: Industry Innovation Centre Specialty Equipment Market Association (SEMA) Los Angeles, USA www.sema.org Located at the Specialty Equipment Market Association (SEMA) headquarters near Los Angeles, SEMA Garage gives members from across the USA access to high-tech tools and equipment they need to take their products from initial concept through to product launch. The 15,000-sq.-ft. facility houses nearly $2 million of equipment, including two vehicle lifts, a portable coordinate measuring machine (CMM) for 3D scanning, a 3D printer for fast prototyping, digital race car scales for the vehicle weight measurements and a dynamometer for power output measurements. The facility also features a fully certified Executive Order (EO) aftermarket-part certification lab to provide the required certification for any company planning to sell aftermarket powertrain parts in the California market. The temperature-controlled test cell can simulate weather conditions ranging from winter in the mountains, summer in the desert. Testing meets all US federal Environmental Protection Agency and California Air Resources Boards (CARB) standards with capabilities that include emissions, fuel economy, acceleration, brake stopping distance, interior/exterior noise levels and handling. SEMA is now in a position to provide members with a reliable and affordable way to develop and test their products, thereby helping them get their products to market quicker. The SEMA Garage originally opened on 9th May 2013 when the aftermarket-part certification lab was first made available to members. A suite of marketing support tools will be added in the next several months to complete the three-phase opening, in the form of a media centre with a photo cove, photography centre and media coordination services. Key Issues AAAA members provide a range of high quality vehicle and four-wheel drive performance replacement and enhancement products and components including suspension components and frontal protection systems (bull bars). Australian aftermarket manufacturing is exported globally and is world-renowned for its quality, however aftermarket manufacturers do not have access to domestic testing and research facilities that would facilitate product development and enhanced export and domestic consumption. Unlike the lengthy and slow product cycles of the OE segment (with seven-year vehicle model cycles); the aftermarket is a very fast-paced segment, driven by rapidly evolving consumer demand and market trends. Success in this sector requires manufacturers to respond quickly to new models and new brands entering the Australian and global markets. Recent announcements by vehicle assemblers Ford, Holden and Toyota to exit the domestic market require new and innovative government action to support the development and growth of Australia’s remaining trade-exposed automotive sector. If we are able to take a step back from the traditionally narrow perspective of the automotive manufacturing industry as only comprising of original equipment producers and instead view the entire automotive manufacturing sector, we can develop policy and programs that support innovation and growth for our remaining, sustainable manufacturers. The automotive aftermarket is not dependent upon local vehicle assembly and hence despite the announced closure of assembly and engine manufacturing plants, the aftermarket segment remains stable and profitable. The Productivity Commission in their recent report stated: The extent of any contraction in automotive component manufacturing, and any consequent reduction in overall employment, will depend on a number of factors. These include the extent to which component manufacturers choose to, and are able to, diversify into other markets (such as exports, aftermarket products and non-automotive products). Australia’s Automotive Manufacturing Industry Productivity Commission Position Paper P 114. January 2014 The Commission also noted that the aftermarket segment is profitable and that the aftermarket parts manufacturing segment in in Australia is less vulnerable to the announced closures (P 7). Indeed the automotive aftermarket segment has performed strongly, achieving year on year growth. The export performance
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