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Quick guide to today's car industry

Japan is lagging against the Korean attack.

Trying to make some sense of it all is tough, but here is my best shot - today.

Australia's car sales are heading for only their fourth 1-million year in 2011, but local production - and therefore exports - is down to the lowest level since 1957.

The general trend - like most of the world - is downsizing. Traditional Aussie six-cylinder family cars - Falcon and Commodore - have had 20-30 per cent sales falls through 2011, while demand for small cars is up by 20 per cent most months.

This is re-shaping the motor industry, leading Holden to start local production of the Cruze alongside the Commodore in Adelaide and forcing Ford to engineer a four-cylinder engine into the Falcon for 2012.

Biggest change through 2011 is the performance of Mazda, which is now consistently number 4 in Australia thanks to the sales of its compact Mazda3.

But Hyundai and Kia are also making rapid gains and Volkswagen is now a top-10 brand for the first time in decades.

On the dealer front, profitability is poor. They have only just recovered from the GFC but the strong Australian dollar and demand for smaller cars has slashed per-unit profits. Some small cars now only earn a dealer a $400 margin.

But car companies are making solid returns, since there are only 3 local manufacturers now and the other 61 brands - including cars, trucks and commercials - are importers who are helped by the strength of the dollar in buying power from home office.

The three local manufacturers - Holden, Ford and Toyota - are all going through major renewals.

The all-new Camry will be out in November - with the Camry hybrid early in 2012 - after a delay because of strike action at Altona.

Ford has updated the Territory this year, including a diesel engine, and it is selling strongly, while the Falcon has also lifted in recent months thanks to a new LPG system that taps into demand from fleets and taxis.

The VE Commodore is being dress-up with value packs - like the latest Equipe - as well as a range of economy improvements including the upcoming dedicated LPG model. Its big move for 2011 was the local production of the Cruze hatch, which is now forecast to eventually overtake the Commodore as Holden's biggest seller.

Cars and utes from Thailand have become the low-cost source for a range of Japanese brands, who have moved production offshore. So that means the Toyota HiLux, a range of Honda models, and the latest Ford Ranger and Mazda BT50 utes, all come from Thailand.

That is good news for consumers who get more cost-effective products and it's also helped Japanese brand stay price competitive.

Japanese brands dominate the Australian automotive landscape and nothing shows it better than Toyota's place at number one, with more than 20 per cent of all sales

Mazda, Mitsubishi, Subaru and Honda are also strong.

But Japan is lagging against the Korean attack and needs to lift the game on quality and 'European' design and engineering as their products are now being matched by Kia and Hyundai on the quality front, and undercut on value and warranty.

Japan was hit worst by the GFC, with brands winding back research and development, so Honda will suffer for at least the next 2 years, Suzuki has nothing new and important for 3 years, and even Toyota's product changes are slower than normal.

Chinese brands are establishing a beach head in Australia thanks to prices that typically undercut an equivalent Japanese model by 30 per cent.

Great Wall is doing best with its utes and a medium SUV, but Chery is struggling with an $11,990 car that is sub-standard - even against the Koreans - on quality, comfort and performance. Geely is the only other passenger car brand but only sold in WA as its cars do not quality for the Victorian safety legislation that mandates ESP in 2011.

But - and it's a big one - the Chinese are learning fast and prepared to make big changes. Poor safety result in independent NCAP testing have led to safety improvements at Great Wall and Chery, and Chery changes the gearbox in the J1 model after a single poor road test by Carsguide. So the industry is still the biggest secondary manufacturing base in Australia and critical to the 'brain thrust' in the country going forward. Holden and Ford now both do global engineering work in Melbourne.

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