Transition from Automotive Industry to Manufacturing of Prefabricated Modular Affordable Housing

PrefabAUS PrefabAUS has pleasure in presenting this submission, on behalf of its members, to the Senate Standing Committee on Economics inquiry on The Future of the Automotive Industry. PrefabAUS is the peak body for Australia’s off-site construction industry with a rapid growing membership of more than 180 companies. PrefabAUS is collaborating with the University of Melbourne to carry out research on the costs and benefits of the transition from Automotive Industry to Manufacturing of Prefabricated Modular Affordable Housing. As a peak body PrefabAUS carries out the following activities:

 educating a wide audience about the benefits of modern building prefabrication;  acting as a portal for quality information about Australian building prefabrication for the public benefit;  maintaining and further developing standards of excellence in performance and products of the Industry;  a forum for exploring and tackling barriers to the uptake of building prefabrication;  addressing barriers to growth of the Industry;  interfacing with government, other organisations and research bodies on behalf of its members;  encouraging research, development and innovation programs across Australia’s building prefabrication industry; and  operating as a not for profit body which raises funds to be applied towards the above objects.

Changing construction industry The Australian construction industry has faced severe challenges over the past two decades. Spiralling costs of building materials and construction have made housing less affordable. Sustainability, health and well-being, and safety imperatives, together with the market-wide expectation for high-quality design, have further challenged traditional construction. Advanced manufacturing of prefabricated housing is a viable alternative. Leading figures in the Australian industry have recognised the productivity and efficiency gains that advanced manufacturing techniques can offer. In particular, enabling technologies such as composite lightweight materials and systems, automated off-site manufacturing, mass customisation and complex systems thinking are essential components of prefabricated housing. Powerful global trends have seen a renaissance in housing prefabrication and modularisation in Europe, the US and Japan. By comparison the Australian industry is in its formative stages but has great potential for growth in revenue, employment and exports. Innovative design, lightweight and high performance materials, and new manufacturing techniques have the potential to enable high- quality prefabricated housing tailored to customers’ needs that is ecologically sustainable, reusable, smart and affordable. New thinking is required to chart the successful work flow from design through to supply, manufacturing and delivery – workflows more akin to automotive, ship and aeronautical manufacturing than traditional design and building methodologies.

Growth potential The current prefabricated building market in Australia is a modest $4.5 bn (3%) of the total $150 bn construction industry. Projections for the ten year outlook indicate a potential market share growth to 10% or $15bn if current challenges can be overcome. The global market in 2014 was estimated at $96 bn. In Australia, demand for low-to mid-rise residential buildings, project homes and public housing are key drivers of demand in prefabricated construction. For example, over the coming decade, Melbourne will require 60,000 public housing units, and Sydney will require a further 80,000. High-quality, lightweight, prefabricated modular systems will contribute to housing stock with excellent amenity for occupants, at substantially lower cost when compared with traditional housing.

The past 50 years of urban development in Australia has been based around building unsustainable car-dependent suburbs on the urban fringe. With Australia’s population growth expected to see a 60 per cent increase to 37.6 million people by 2050, the industry needs to look to more cost effective and well-designed inner city developments at higher densities. Prefabricated housing is a next generation housing construction industry, a game changer in cost of housing, competitiveness, efficiency and productivity.

In Japan and across Europe, prefabricated housing is widely accepted as a quality alternative to traditional construction due to its speed of delivery, design options and energy efficient choices. This represents exciting opportunities for Australia to innovate as our prefabricated housing industry continues to grow and span not only individual houses but also medium and high density solutions while ensuring we remain globally competitive.

Automotive and industry diversification

In 2013, about 44,000 people in Australia were employed in the manufacture of cars, engines, electrical and other components, as well as trucks, buses and products for the automotive aftermarket. There were an additional 233,000 people employed in the repair, maintenance and retailing of motor vehicles and parts. The three motor vehicle producers are supported by a complex logistical supply chain of about 260 businesses involved in the engineering, design, tooling and manufacturing of automotive components.

The fact that automotive represents such a complex, vertically integrated supply chain suggests the impact of its closure will be very wide and significant indeed. Further, automotive has sustained and brought together key enabling technologies and capabilities, the like and scale of which is not found in many other parts of the Australian economy. These include: systems integration, advanced materials science and engineering, automation and control technologies, electronics and miniaturisation, digital content, sensing and simulation, high tooling skills, and so on.

The bulk of these skills, technologies and companies will be lost unless these can be transformed into new markets such as prefabricated modular housing.  The skills and capabilities of more highly qualified workers and SMEs involved in the supply chain have a great potential to be transferable to other sectors such as building industry, especially prefabricated modular construction.  Opportunity exists to retrain workers for new jobs, and repurpose automotive component supplier companies for roles in new value chains, such as prefabricated modular construction. The emerging prefabrication industry has a great opportunity to take advantage of the skills of the automotive sector. The automotive industry could help the prefab industry expand manufacturing plants, utilise new materials and systems, improve assembly lines, and develop automated plant technology that makes off-site construction more efficient. However, the available time is short and there is an acute need for focus, purpose and action. The successes to date of prefabricated have owed much to application of automotive know-how and methods. The potential is to accelerate and broaden the transformation and development of a 21st century manufacturing industry by having a collaborative and coordinated approach.

The Stella building in Perth had been built with prefabricated components in 11 days. It performed better on all fronts compared with conventional construction. Thermal performance was 30 per cent better; waste was halved; the building was completed in 40-50 per cent less time; construction costs were down 10-20 per cent; aggregate funding costs were down 35-40 per cent; and there were improved returns for the investor.

Similarly in Melbourne, the 68 apartment, Little Hero building in Melbourne CBD was been built with modular prefabricated components in 9 days. All the components were manufactured off-site in a factory in Brooklyn, Victoria. The construction time was reduced by 6 months compared to conventional build. The builder, Hickory, has employed 12 engineers who had worked in automotive industry (7 of them were former Holden engineers), as well as engaging many suppliers from the automotive sector to build parts. They have utilised the skills from automotive manufacturing and are successfully applying them to prefabricated building construction. Hickory is now constructing many prefabricated building projects around Australia and manufacturing thousands of fully fitted bathroom pods every year.

Expected outcomes  Supporting a 10% growth of market share by 2025 which will create 20,000 new jobs by 2025;  Construct up to 90% faster than traditional methods  Reduce total costs by up to 50%  Addressing shortage of affordable and end-user focused residential housing.  Achieve 100% re-use of componentry, recycle 80% of site waste  Reduce transport, labour, and site preliminaries by 70%  Expand export opportunities  Secure and maintain competitive advantage in global value chain

Contact details: Mr Damien Crough, Chairman of PrefabAUS Dr Tuan Ngo, Director of APTES Group, The University of Melbourne