Reviving Australia’s Automotive Industry Amid China’s EV Boom

This article examines the evolution of China’s EV industry, from early strategic policy measures to its current position as a global leader. It then turns to Australia’s automotive sector, analysing how the industry’s closure left the country unable to position itself as a significant player in EV manufacturing. Finally, it explores whether a viable pathway exists for Australia to re-establish an automotive presence by pivoting toward EV assembly and leveraging China’s technological leadership in the sector.

Development Path of Chinese EVs

The emergence and rapid growth of Chinese EVs is deeply rooted in sustained and strategic policy support. An early milestone came with the 2008 Beijing Olympics. To meet the green transportation requirements of the Olympics, Chinese manufacturers such as China First Automobile (FAW), Dongfeng and Shanghai Automotive Industry Corporation (SAIC) independently developed a range of new-energy vehicles, including pure electric buses, hybrid sedans and fuel cell buses. This advanced, eco-friendly Olympic fleet showcased China’s early capabilities in the EV sector.

From 2009, government initiatives such as the “Ten Cities, Thousand Vehicles” pilot program and the subsequent 2013 “List of Cities or Regions for the Promotion and Application of New Energy Vehicles” expanded EV deployment at scale. These landmark policies effectively marked the operational launch and widespread adoption of EVs across various Chinese cities and regions.^{[9], [10]}

A pivotal turning point arrived in 2019 with Tesla’s entry into China. In January that year, Tesla broke ground on its first overseas Gigafactory in Shanghai – China’s largest-ever foreign manufacturing project – becoming the first foreign automaker permitted to establish a wholly owned plant in the country. This was enabled by policy reforms that removed foreign equity caps in the new energy vehicle sector.^[11] Notably, Tesla also received the same government incentives and tax breaks available to local automakers, including an estimated USD $325 million in subsidies in 2020 – the largest amount granted to any automaker in China that year.^[12]

The localisation of Tesla’s production sharply reduced manufacturing and logistics costs, allowing it to compete in the mid-range market and placing greater pressure on Chinese domestic automakers. Chinese analysts dubbed this the “catfish effect”, whereby Tesla’s presence spurred local firms to accelerate innovation, cut costs and improve quality.^[13] Companies such as XPeng, for example, have advanced rapidly in autonomous driving technologies tailored to the complex and diverse conditions of Chinese roads.^[14] And Tesla’s gigacasting technology (large-scale die casting) inspired local firms like Xiaomi to develop “hyper die casting” with even higher clamping force (9,100 tons vs Tesla’s 6,000), reducing production costs and complexity.^[15]

By 2024, a combination of supportive policies and coordinated industrial efforts had propelled Chinese EV sales beyond 12.8 million units, securing the country’s global lead for the tenth consecutive year.^[16] Firms like BYD, working closely with universities, research institutes and supply-chain partners, have leveraged advanced smart technologies to integrate battery manufacturing, electric motors, controllers and vehicle assembly, emerging as some of the most cost-efficient EV producers worldwide.^[17]

As subsidies were phased out and domestic competition intensified, these firms expanded aggressively overseas, leveraging price competitiveness and product diversity to gain market share.^[18]

With Chinese EV firms now dominating both global and Australian markets, the key question is: what lessons can Australia take from their success – and how can these insights be applied to revitalise its own automotive and manufacturing sectors?

Australia’s Automotive and Manufacturing Industry

The Former Automotive Industry

The closure of Ford, Holden and Toyota manufacturing plants between 2016 and 2017 is commonly viewed as the end of Australia’s automotive industry, which had been established in Australia in the aftermath of the Second World War. It marked the end of a nearly 70 years of domestic automotive production, which began in 1948 with Holden's first locally built car.

In response to the closures, the government and supply chain companies coordinated their efforts to manage the transition and support workers in finding alternative employment. Despite initial fears of 40,000–50,000 job losses, actual losses were closer to 14,000 due to government-led transition and diversification initiatives.^[19]

While some supply chain firms successfully diversified, the absence of large-scale automotive manufacturing combined with a lack of coordinated investment and strategic planning meant Australia was not in a position to pivot into EV production as EV technology emerged.^[20] Meanwhile, the broader manufacturing sector has continued to decline. As shown in Figure 3, employment in the manufacturing sector as a share of total national employment has steadily fallen from 16% in 1985 to below 5.89% as of May 2025, marking the lowest level ever recorded.^[21]

Initiatives to revive Australia’s automotive industry

Could the rapid global growth of the EV industry be the catalyst that Australia needs to revive the nation’s automotive sector? If harnessed effectively, it could also stimulate broader growth across the nation’s manufacturing landscape. With abundant reserves of critical minerals, a highly skilled workforce and a well-established industrial foundation, Australia seems to be well-positioned to pursue EV manufacturing as a strategic pathway to capitalise on the global shift toward electrification.

Establishing EV manufacturing in Australia also presents a powerful opportunity to strengthen the national economy. Unlike imported EVs, which add little to domestic value creation, locally manufactured EVs contribute directly to GDP through industrial output, job creation and tax revenue, while also generating indirect benefits via supply chain development, infrastructure investment and innovation. Furthermore, over-reliance on imported EVs could constrain Australia’s economic diversification as EV adoption accelerates. Although Australia currently maintains a trade surplus with China – largely driven by resource exports – ongoing dependence on importing high-value finished goods like EVs risks entrenching a resource-based economic model and limiting the growth of advanced manufacturing and innovation.

“The skills, experience and knowledge to create new cars, including EVs, is still at work in our country, and this is a rare chance to make Australia a significant contributor to the global EV economy with vehicle design, development and manufacturing.” – Premcar Pty Ltd"^[22]

To this effect, there have been two notable recommendations put forward to guide Australia’s path toward establishing EV manufacturing:

1. In 2018, the Australian Senate established the Select Committee on Electric Vehicles to inquire into the use and manufacture of EVs in Australia. Its final report, released in 2019, included a key recommendation: “The Committee recommends that the Australian Government develop and implement a comprehensive 10-year EV manufacturing roadmap.”^[23]

2. In 2022, Australia Institute’s Carmichael Centre released a report claiming that “A unique combination of advantages has handed Australia a historic chance to become a sustainable global manufacturer of electric vehicles – provided the federal government acts swiftly and decisively.”^[24] That report called for bold measures such as the introduction of tax incentives to support local manufacturing and the creation of an EV Manufacturing Industry Commission.

However, the government of the time did not pursue either of these recommendations. The contrast between China's proactive industrial policy and Australia's more passive approach is stark. While China leveraged its policy tools and industrial capacity to become a global EV leader, Australia has largely remained a supplier of raw materials, missing the opportunity to build the higher-value segments of the EV supply chain like battery and vehicle manufacturing.^[25]

In recognition of the declining manufacturing sector in Australia and broader economic vulnerabilities, the government established a National Reconstruction Fund (NRF) in 2023, with $15 billion allocated to invest through direct loans, equity investments and loan guarantees across seven priority areas – with transport being one of the eligible categories.

Though the NRF will certainly assist in encouraging the growth of the manufacturing industry, it alone might not be enough to establish an EV manufacturing industry in Australia, given that such a venture is high-risk and capital-intensive, requiring large upfront investment in tooling, robotics and sourcing of supply chains. As the NRF seeks a significant commercial return, even with Australia’s skilled workforce, NRF funding might not be sufficient to propel such strategic initiatives.^[26]

The National Electric Vehicle Strategy (NEVS), launched in April 2023, was widely seen as a positive step, with emphasis on accelerating EV uptake, expanding charging infrastructure and fuel efficiency standards.^[27] While the strategy acknowledges the importance of local manufacturing and recycling, it does not provide a dedicated roadmap or new funding measures for establishing domestic EV manufacturing. As such, despite encouraging EV adoption rates, Australia’s transition pathway is to remain heavily reliant on imports.^[28]

Several privately funded organisations in Australia have already initiated EV manufacturing at a small scale with promising results. These include SEA Electric, ACE EV and Nexport. However, without sufficient government subsidies, most of these initiatives are unlikely to scale up their manufacturing. For example, Nexport announced a $700m EV assembly plant in Moss Vale, NSW, for EV buses and eventually cars. However, the project collapsed, citing a lack of funding and government incentives.^[29]

With the global EV industry now highly advanced and mature, and Australia still without large-scale domestic EV manufacturing, the question arises: has the window closed for building a competitive local capability? While Australia possesses many of the key ingredients – such as critical minerals, a skilled workforce, engineering talent and industrial infrastructure – it has not yet translated these advantages into a coherent EV manufacturing strategy. Is Australia to remain a major importer of EVs, rather than a producer, potentially missing the opportunity to revitalise its automotive sector and strengthen its broader manufacturing base?

While it may be unlikely that Australia will establish full-scale EV manufacturing under a homegrown brand, the global EV boom is still unfolding – and the opportunity has not yet passed. The industry continues to evolve and grow, presenting Australia with a narrowing but still viable window to act. With the right strategic interventions, Australia could still carve out a meaningful role in EV manufacturing. So, what are the options available to ensure Australia doesn’t miss this critical moment?

Possible Pathways for Australia’s EV Manufacturing Future

With the right mix of policy settings, strategic investment and industry leadership, Australia still has the potential to build a sovereign EV manufacturing capability. One practical entry point could be small-scale assembly using imported kits, gradually scaling up over time. For instance, an Australian firm could establish a CKD or SKD assembly operation. CKD (Completely Knocked Down) refers to vehicles shipped in fully disassembled form for local assembly, while SKD (Semi Knocked Down) involves partially assembled units requiring minimal final assembly. Either approach could serve as a stepping stone toward building domestic expertise, gradual integration of supply chains and eventually full-scale production.

The CKD/SKD assembly approach offers a pathway to faster market entry with lower upfront capital requirements. However, this approach typically yields lower profit margins, as most of the value is embedded in imported components and the local value-add remains limited. SEA Electric demonstrated promising results using this model in Australia, specialising in the assembly of electric trucks and commercial vehicles through an SKD process – though it is no longer operating as an independent Australian company following its recent merger with Exro Technologies, a Canadian clean-tech company.^[30]

Another strategic option is to partner with a leading global EV manufacturer to establish local assembly operations in Australia through a shared investment model or foreign direct investment (FDI). This approach would give Australia access to proven technologies, established supply chains and global expertise, enabling faster scale-up and reducing technical risk. Over time, it could also become a more profitable pathway – particularly if Australia is able to integrate local content, build domestic supply chains and pursue export opportunities.

Such FDI could significantly ease the upfront costs of establishing a manufacturing facility – expenses that typically include tooling, robotics and production infrastructure, which often pose major hurdles for domestic firms. Securing such investment, however, would likely depend on well-designed government incentives and subsidies, as well as careful negotiations covering intellectual property rights, governance structures and local content requirements. Various FDI models could be considered, including wholly owned subsidiaries or joint ventures with a local company or government entity.

For global EV manufacturers, FDI offers strong returns from vehicle sales, strategic regional access and long-term profitability. For Australia, the benefits are equally compelling: job creation, technology transfer, infrastructure investment and higher tax revenues. Domestic supply chains would also stand to benefit – spanning body and chassis components made from locally produced steel and aluminium, glass manufacturing for windscreens, and the production of electric motors, charging systems, telematics and software systems.

Ultimately, strategic FDI partnerships have the potential to revitalise Australia’s manufacturing sector, reduce dependence on imports, and build resilience across critical industries such as transport, energy and advanced manufacturing.

Australia’s Strategic Window of Opportunity

Partnering with a leading global EV manufacturer to establish local assembly operations could be a timely and strategic move. Australia currently has a unique window of opportunity to attract FDI, particularly from leading Chinese EV manufacturers. For the first time, many of these companies are prioritising international expansion over domestic investment, creating a rare opening for Australia to position itself as a competitive and attractive destination for EV manufacturing. With the right policy settings, incentives and industry engagement, Australia could seize this moment to build domestic capability and secure a foothold in the global EV value chain.

Chinese EV industry has long been regarded as “one of China’s most inward-focused industrial sectors”.^[31] However, in 2024, for the first time on record, Chinese EV companies invested more in overseas projects than domestically. This marks a reversal from previous years, where 80% of investment was domestic.^[32] This historic shift seems to be driven by intense domestic competition resulting in tighter margins and regulatory pushback in markets like the EU, prompting localisation of production to maintain market access.^[33]

Chinese EV manufacturers have taken a highly strategic approach to global expansion, deliberately avoiding markets such as the U.S. due to ongoing geopolitical tensions and seeking markets that offer more favourable regulatory environments.^[34] Even Mexico – once seen as a strategic gateway to the U.S. market – has become uncertain, as plans for a Chinese EV factory have been put on hold following threats of punitive tariffs from the U.S. government should Mexico allow such investments.^[35]

In contrast, regions such as Asia, South America and Europe have emerged as preferred destinations for Chinese EV manufacturers. Factors such as geographical neutrality (Asia), government support (South America) and high EV adoption rates (Europe) are thought to be some of the reasons for those locations.

While Chinese EV manufacturers may face certain barriers before investing in similar projects in Australia – outlined below – the country nonetheless stands out as a uniquely favourable destination among Western nations given:

1. There is no legacy automotive industry to disrupt, creating a clean slate for an EV manufacturer/OEM to establish operations without entrenched domestic competition.

2. It offers a stable political environment, a steadily improving relationship with China, and no import tariffs on EV components under existing trade agreements.

3. EV sales in Australia are growing rapidly, with Chinese brands like BYD, MG and GWM gaining significant market share.

Could an EV Industry Realistically Revive Australia’s Automotive Sector?

Establishing EV assembly plants in Australia through a foreign partnership could stimulate the development of a broader supply chain, including component suppliers and software integration. While Australia would initially depend on imported parts, such as battery packs, these could gradually be incorporated into local manufacturing as the country’s battery production capabilities mature, driven by the National Battery Strategy.^[36] With Australia already active in lithium mining and refining, advancing into battery manufacturing and EV manufacturing could bring the nation closer to achieving the complete end-to-end EV value chain.

Thus, establishing EV assembly plants could not only revive Australia’s automotive manufacturing sector but also position the nation as a leader in clean technology and advanced industrial capability. This could create a “catfish effect” for the Australian manufacturing industry, further driving innovation and competitiveness across the sector.

However, it also raises a critical question: could the same structural challenges that contributed to the collapse of Australia’s traditional car industry – notably high labour costs, limited economies of scale and a relatively small domestic market – once again undermine the viability of local vehicle production, even in the era of electrification?

In terms of labour, the assembly of EVs generally requires less labour than internal combustion engine (ICE) assembly – due to its simpler drivetrain design and fewer moving parts. For example, EVs eliminate many components found in ICE vehicles, such as exhaust systems, fuel systems and complex transmissions.^[37] Also, the more modular design of EVs allows large pre-assembled units (e.g., battery pack, drive unit) to be installed in fewer steps and with more potential for automation.^[38] Consequently, Australia’s comparatively high labour costs are likely to exert less influence on EV assembly than they did on ICE vehicle production.^[39]

Furthermore, Chinese EV manufacturing has a greater focus on left-hand drive (LHD) vehicles, reflecting the dominant configuration across global markets and its domestic market. Adapting production to also serve right-hand drive (RHD) markets – such as Australia – introduces added complexity and cost due to reduced economies of scale and bespoke engineering requirements.^[40] On the other hand, establishing local assembly operations in Australia would enable specialisation in RHD models tailored to domestic driving environments and regulatory standards, while also supporting stronger integration with local EV supply chains. This RHD-focused manufacturing approach would simplify production and enable more effective use of automation, helping offset Australia’s higher labour costs. Collectively, these advantages could reduce vehicle costs compared to imported Chinese equivalents and reinforce Australia’s capacity to develop a competitive EV industry.

Moreover, vehicles manufactured in Australia could also serve overseas RHD export markets. This potential has already been demonstrated by AUSEV, an Australia firm that specialises in ICE to EV conversions of Ford F-150 Lightnings, and exporting them to RHD market destinations such as Barbados, supporting clean transport deployment across island nations in the Pacific and Caribbean.^[41] Similarly, large-scale EV manufacturing in Australia could unlock export pathways to RHD markets in Southeast Asia, the Pacific and India (see Figure 4) – regions where demand for RHD EVs is accelerating.

Competitive Pressures from Regional EV Manufacturing Hubs

While Australia has a window of opportunity, Thailand has already capitalised on it by becoming a key overseas hub for several Chinese EV manufacturers in 2024.^[42] Leading brands such as BYD, Changan, MG, GWM and Chery have already announced or commenced operations there. With Thailand’s lower labour costs compared to Australia, competing in manufacturing could pose considerable challenges if Australia seeks to pursue this opportunity.

However, the EV manufacturing plants in Thailand face their own challenges. For instance, given Thailand is positioning itself as a major export hub, manufacturers increasingly need to cater to both RHD and LHD markets while complying with multiple regulatory regimes (e.g., ASEAN, EU, Middle East, Australia/New Zealand). This multi-market orientation adds complexity to production and compliance processes – see Table 1 below.