The Australian car industry faces a big drop in demand.
AUSTRALIA'S car industry seems to be travelling well, but serious challenges are just over the horizon. British entrepreneur Richard Branson recently predicted that oil would reach $US200 a barrel by 2015.
This would have big implications for Australia's three main car makers that specialise in petrol-guzzling rear-wheel-drive vehicles. How will the industry cope with a big drop in demand for such cars?
The upward trend in electric vehicle production and demand - which will increase along with oil prices - is the key to future-proofing the Australian car industry.
The first Chevy Volt electric vehicles rolled off GM assembly lines in Michigan last month. The US car maker has made the electric vehicle (EV) a key plank in renewing its brand.
Renault/Nissan has followed suit. The Leaf, its first pure electric car, and new EV models will be mass-produced at 500,000 units a year within three years. Chinese electric car maker BYD is already there, with an estimated 500,000 electric vehicles sold this year.
These companies are betting on huge upswings in EVs, and rightly so. American company General Electric is committed to having 25,000 electric vehicles in its global fleet by 2015.
If we want to avoid being left with an increasingly weak car industry, we have to move ahead with manufacturing pure electric and plug-in hybrid electric cars in Australia.
The time has come for the Labor government to strengthen the car industry and turn threats into opportunities, providing matched funding to retool Australian car plants for electric-vehicle production.
The government can stimulate domestic demand for Australian-made EVs.
According to an IBIS World Report from 2009, only 15 per cent of the million cars sold in Australia each year are supplied from our local plants.
A commitment to electrify the government's entire vehicle fleet and refocusing fringe-benefit tax exemptions from petrol vehicles to EVs is the key to driving demand.
These measures can be timed to coincide with retooled factories starting production. (Just imagine Australian families buying Chevy Volt-type plug-in hybrids packaged as Commodores and Falcons).
The Gillard government can work with state and territory governments to develop a plan for the strategic development of Australia's rare-earth resources.
Lithium and other magnetic minerals are the critical ingredient of EV systems. Developing domestic rare-earth supplies will boost our EV manufacturing and break China's tight grip on global rare-earth supplies.
Public investment in research and development and enabling infrastructure (recharge stations) can position Australia at the forefront of electric-vehicle technology.
While our economic competitors in North America and Europe are entering an era of austerity, Australia's economy is healthy. We can afford to invest in measures to future-proof our car industry and protect jobs. Indeed, this is what is needed so Australia can catch up with leading innovators in Japan, Europe, and the US.
The switch to EVs is on. But Australia's role in the switch is not assured.
It remains unclear whether the Gillard government will act this year to empower the Australian car industry. Failure to do so will squander that industry's opportunity of a lifetime.
The change from the 19th-century combustion engine to electric drivetrains can boost Australian-made vehicle sales from 150,000 cars a year, as they are today, to more than 500,000.
Matthew Wright is a director of Beyond Zero Emissions.