How much does it cost to make a car

The car manufacturing industry in Australia has had an incredibly long history, dating back to the early 1900s. However, the industry has faced significant challenges in recent years, with many major manufacturers shutting down their operations in the country. Despite this, there is still considerable interest in the cost of making a car in Australia.

Factors that Affect the Cost of Making a Car

Labour costs

One of the most significant costs of manufacturing that affect the cost of making a car in Australia is labour costs. Australia has some of the highest labour costs in the world, with an average hourly wage of around $30. This makes it difficult for manufacturers to compete with countries with lower labour costs, such as China and India.

Raw material costs

The cost of raw materials such as steel, aluminium, and rubber also affects the actual cost of car making in Australia. While some of these materials can be sourced locally, others need to be imported, which can increase the price.

Energy costs

Energy costs, including electricity and gas, can also significantly impact the cost of making a car in Australia. These costs have been rising in recent years, making it more expensive for manufacturers to operate in the country.

Government regulations and taxes

Government regulations and taxes can also affect the cost of making a car in Australia. For example, manufacturers need to comply with strict emissions standards and safety regulations, which can increase the cost of production. Additionally, the government imposes a range of taxes, including import duties and excise taxes, which can make it more expensive to import and sell cars in the country.

Research and development expenses

Another factor that contributes to the variable costs of making a car in Australia is research and development expenses. These costs are necessary for manufacturers to innovate and improve their products, but they can also add significantly to the overall cost of production.

Breakdown of Costs of Making a Car 

Cost of production

The cost of production includes the various expenses involved in designing, engineering, prototyping, testing, tooling, and the equipment required to manufacture a car. These costs can vary based on the complexity of the design and the manufacturing process. Therefore, this is why there is no fixed cost for car manufacture in Australia.

Design and engineering costs

Design and engineering costs include creating a new car model or updating an existing one. This includes research and development, conceptual design, computer-aided design (CAD), and physical modelling.

Tooling and equipment costs 

Tooling and equipment costs include the costs of creating the moulds, dies, jigs, and fixtures required to manufacture the car. This can also include purchasing or leasing manufacturing equipment such as presses, robots, and assembly lines.

Materials costs

Material costs include the expenses involved in purchasing the raw materials required to manufacture the car, such as steel, aluminium, plastics, and glass.

Labour costs

Labour costs include the costs of paying workers to manufacture the car, including wages, benefits, and training.

Marketing and distribution costs

Marketing and distribution costs include the expenses involved in promoting and selling the car, such as advertising, sales commissions, and dealer incentives.

Advertising costs

Advertising costs include the expenses involved in creating and running advertisements in various media channels, such as TV, radio, print, and online.

Sales commissions

Sales commissions include the expenses involved in paying salespeople to sell the car. This can consist of salaries, bonuses, and incentives.

Dealer incentives

Dealer incentives include the expenses involved in providing incentives to dealers to sell the car, such as rebates, financing deals, and marketing support.

Overhead expenses

Overhead expenses include the various indirect costs of running a manufacturing operation, such as rent, utilities, and administrative fees.

Rent and utilities

Rent and utilities include the expenses involved in leasing or owning a manufacturing facility, as well as the costs of utilities such as electricity, gas, water, and internet.

Administrative expenses

Administrative expenses include the expenses involved in running the day-to-day operations of the manufacturing facility, such as salaries and benefits for office staff, accounting and legal fees, and insurance costs.

Tariffs and taxes

Tariffs and taxes include the various charges that the car manufacturer has to pay to the government. These costs include import/export tariffs, excise taxes, value-added taxes, and other fees.

Import/export tariffs

Import/export tariffs are taxes on goods imported or exported from one country to another. These tariffs can vary depending on the type of car and the country of origin.

Excise taxes

Excise taxes are levied on specific goods, such as luxury items or goods considered harmful to public health or the environment. In Australia, a luxury car tax is applied to cars that cost over a certain threshold.

Value-added taxes

Value-added taxes are taxes applied to goods at each stage of production and distribution based on the value added at each stage. A goods and services tax (GST) is applied to most goods and services.

Environmental and safety standards

Environmental and safety standards include the various regulations car manufacturers must comply with to sell their cars in Australia. These standards can impact the cost of making a car by requiring more expensive materials, equipment, and processes.

Emissions standards

Emissions standards are regulations that limit the number of pollutants that a car can emit into the atmosphere. In Australia, cars must comply with the Australian Design Rules (ADR) emissions standards based on international standards.

Safety standards

Safety standards are regulations that require car manufacturers to design and build safe cars for drivers and passengers. In Australia, cars must comply with the ADR safety standards, which cover everything from seat belts and airbags to crash testing and electronic stability control.

Car Manufacture Costs: Impact of Innovation & Technology

Advances in automation, new materials, manufacturing processes, and the integration of digital technologies have the potential to significantly impact the cost of making a car in Australia.

Automation and robotics

Automation and robotics have been transforming the manufacturing industry for decades, and the car industry is no exception. By automating various processes, manufacturers can increase efficiency, reduce labour costs, and improve the overall quality of their products.

New materials and manufacturing processes

Advances in materials science and manufacturing processes can also help to reduce the cost of making a car. For example, using lighter materials can improve fuel efficiency and reduce the cost of raw materials.

Digital technologies

Integrating digital technologies, such as the Internet of Things (IoT) and artificial intelligence (AI), can help optimise manufacturing processes and reduce waste. For example, sensors can monitor equipment and identify potential issues before they become significant problems, while industries can use AI algorithms to optimise production schedules and reduce downtime.

Innovations in energy efficiency

The energy cost is a significant factor in the overall cost of making a car. Innovations in energy efficiency, such as renewable energy sources or more efficient heating and cooling systems, can help reduce these costs.

3D printing

3D printing is a process that allows car manufacturers to create complex parts and components using a computer-controlled printer. This can reduce the need for expensive tooling and equipment and make producing small quantities of custom parts easier.

Car Maintenance Tips 

Regular oil changes

Regular oil changes are essential to keep your engine running smoothly. Recommended oil change intervals vary by manufacturer and model, but most recommend changing the oil every 5,000 to 10,000 kilometres. Brands such as Toyota, Holden, and Ford all recommend regular oil changes.

Check tire pressure

Proper tyre pressure is an essential maintenance tip for safety and fuel efficiency. Check your tyre pressure regularly, and inflate the tires to the recommended level. Brands such as Mazda, Hyundai, and Mitsubishi all recommend checking tire pressure regularly.

Replace air filters

Dirty air filters can reduce engine performance and fuel efficiency. Replace your air filters regularly, typically every 12,000 to 24,000 kilometres. Brands such as Kia, Subaru, and Volkswagen all recommend replacing air filters regularly.

Check brakes

Brake maintenance is essential for safety. Have your brakes inspected regularly, and replace brake pads and rotors as needed. Brands such as Honda, Nissan, and BMW all recommend regular brake maintenance.

Keep fluids topped up

Ensure your car's fluids, including coolant, brake, and transmission fluid, are topped up to the recommended level. Brands such as Mercedes-Benz, Audi, and Lexus all recommend regular fluid checks.

Replace spark plugs

Worn spark plugs can reduce engine performance and fuel efficiency. Replace your spark plugs regularly, typically every 80,000 to 160,000 kilometres. Brands such as Volvo, Peugeot, and Citroen all recommend replacing spark plugs regularly.

Inspect belts and hoses

Worn belts and hoses can lead to engine damage and failure. Have your belts and hoses inspected regularly, and replace them as needed. Alfa Romeo, Jaguar, and Land Rover recommend regular belt and hose inspections.

Maintain your battery

Check your battery regularly, and replace it if it is over three years old. Brands such as Holden, Subaru, and Toyota all recommend regular battery maintenance.

Keep your car clean

Regular cleaning and detailing can help to protect your car's paint and finish and prevent rust and corrosion. Brands such as Ford, Hyundai, and Mitsubishi all recommend regular car cleaning.

Understanding the Manufacturing Cost of Cars AUS

For car manufacturers, it is essential to have the industry knowledge of making a car in Australia and to explore ways to optimise the production process and reduce costs where possible.

It is also crucial to leverage the potential benefits of new technologies and innovations to improve efficiency and productivity. For consumers, it is essential to be aware of the various costs involved in producing a car, including tariffs, taxes, and environmental and safety standards. 

By understanding these costs, consumers can make informed decisions about which cars to buy and can support car manufacturers that prioritise sustainability and innovation. You can negotiate with dealerships or car trade platforms to help you choose the best car suited to your budget.