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Japanese Greener Engines’ Industry in the Australian Market Case Study

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Updated: Apr 9th, 2020


Our today’s society faces a lot of problems and environmental ones are in the list of the most serious of them. Technologies, especially cars, have an adverse influence on the nature. They not only pollute air with exhaust gas, but also waste a great amount of oil. Modern motor vehicles seem to be created in order to prevent the further impurity.

To reduce the dwindling oil supplies a number of different alternative fuels was thought to be used. However, each of them seems to have some problems to be solved. Moreover, agricultural crops suffered earlier, as were used for human food consumption. A temporary response to this problem can be the usage of natural gas or biogas, while the best decision is a carbon-free fuel.

Different hybrid cars were created to find the best suitable solution. Electronic and compressed air vehicles, hydrogen concepts are one of them. Such advanced technologies were created with the assistance of Australia, as it has a great experience in upgrading new concepts and projects.

Not long ago, the government provided the companies with grants for hybrid production. For new participants such regulatory areas as safety standards might be challengeable (Australia’s automotive manufacturing industry, 2014). One more problem that can stay in the way of applying new systems is the supply of alternative fuel. Of course, the contribution of Toyota and Australia’s cooperation in the global industry is just a small part of the whole.

Leaving Japan for Australia

Since 2000 the fuel prices have been rising, so Australia and its auto industry in particular were not able to react as quickly as it was needed. People are not looking for the large cars as they want to reduce a bad influence on the nature and their fuel bills. The costumers’ interest is kindled by smaller cars and the sales of the others reduce.

A helping hand to the Australian auto industry came from Japan, as Toyota claimed to build the first hybrid cars there starting with 2010. Still, it is not clear whether such direction will be always adhered or not. However, there is no doubt that now Australian cars become known as green ones.

The decision made by Toyota to undertake the foreign direct investment (FDI) in Australia had several factors. It was based on the idea of “absolute” competitive advantage, as the company was awaiting higher value being abroad than on the native land. This happens because of the production superfluity, extremely high requirement for resources, advanced manufacturing sciences, and high labour productivity. These elements enable the company to come in contact with others that have something else and are ready to exchange.

Japanese companies chose the location where they can gain the best reward and be sure that the risks are minimized. These things were impossible to find in Japan, as it is considered to be one of the most expensive countries and a lot of money is to be paid for taxes, labour and other staff. So the FDI is the way out for Japanese companies.

Low production costs attracted them to Australia, where the world-class production standards are bided. The infrastructure there became better, and economic development gained momentum rapidly (Bayari, 2008). Thus, three main factors were considered when it was decided to start investing: the economic development, the lowering of institutional barriers and technology.

Why Melbourne?

According to the research of the Australia-Japan Economic Institute more than a half of all Japanese companies located in Australia are in Melbourne. However, it cannot be said that this region has a high level of unemployment or low wages. Still the choice of location can be made due to the low unionism, as its high level proved to have an adverse influence on the investment purposes.

Moreover, the busiest port of Australia is located in Melbourne, which streamlines the transportation of vehicles to other cities and countries. Toyota pointed out that the reliability of the port and waterfront is very important for the international competitiveness. The access to the port is limited, which has a negative effect on the industry; however, they hope the situation will improve (Perspectives on Japanese investment, employment and management in Australia n.d.).

The government of Victoria (where Melbourne is situated) promised to buy 2000 of the new green cars to attract people to the innovation and bolster demand for the vehicles. It is said that Toyota chose Melbourne instead of Japan provided the suppliers with the opportunity to export the subsidiaries in other countries. The commercial research and development in Australia is important for this. A huge advantage was also in the Green Car Innovation Fund.

It was set by the Australian government and secured the production of the hybrid in the country. The Australian government also invested 35 million dollars in the Toyota’s Altona plant, which is thought to be the branch of the main plant and is located in West Melbourne. So the local community assistance and the federal government assistance with manpower help the company to develop and extend (Toyota plant in Australia to build greener engines, 2010).

Toyota’s Reputation

Australia is a centre for investment from Japan. Their connection is built on the mutual trust and interest that already exists for several years and becomes stronger. The foundation for these relations is the Agreement on Commerce that was signed in 1957. Since that time the countries developed them, so Japanese people were not extremely surprized by the Toyota’s decision.

The company has its main office in Japan, so it is treated as a Japanese one. It is prominent and is known all over the world as a provider of decent cars of good quality. That is why people do not worry that the vehicles are made in Australia. Of course, there are people who are dissatisfied with such location, but it is a minority. Others support the Toyota’s wish to save money and provide customers with worthy products.

International buyers always pay attention to the place where the cars were assembled. However, in this case Toyota is also on the winning side. Commonly, people believe Australia to be a good supplier of automobiles. Its development in different spheres attracted the customers and insured them in the standards compliance of vehicles. Toyota itself is believed to prepossess drivers due to the quality of its cars.

Toyota’s Approach to Managing FDI

FDI is the investment of a company into the creation of its plant abroad; it can also be a combined investment with the company from another country into the market. The development of trade industry increased the level of the FDI in the 21st century. Such investments have a positive influence on the both countries and their industries.

Japan’s investment gave Australia an opportunity to get access to new technologies and to gain skills needed for the work. It also provided the citizens with working places and raised the economical level of the city. This happened as people were needed to build the plant and then to maintain services. As an automobile industry is partially located abroad, the company does not have to extend immediately. It can wait for some time and give small businesses more opportunities.

At the same time Japan is able to reduce its expenses, create a competitive product and force Australian businesses to bring down the prices. Citizens may now ignore their local automobile companies and refer to the Japanese one. In the meantime, Australia gains the access to the other countries as it has a competitive product. The number of Toyota’s customers increases as it starts to gather those who prefer Japanese cars and those who prefer Australian ones.

However, if some problems occur at one of the sides (natural disaster, war or any other serious issue) the whole company will suffer. Its shares may fall, the workers can quit or lose their jobs, and the production itself might stop within a particular plant. Such things are sure to have a negative influence on the company, industry and country.


Thus, Japan decided to undertake FDI in Australia because of the expensive labour, resources scarcity, availability of funds for investment, and the specificity of the company. Australia needed an impulse for the development and some new approach to the automobile industry. The relations between the countries brought both of them many advantages and a promise for further extension.


. (2014). Web.

Bayari, C. (2008). Japanese auto manufacturers in the Australian market and the government industry assistance spending. The Otemon Journal of Australian Studies, 34(1), 87−107.

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"Japanese Greener Engines' Industry in the Australian Market." IvyPanda, 9 Apr. 2020, ivypanda.com/essays/japanese-greener-engines-industry-in-the-australian-market/.

1. IvyPanda. "Japanese Greener Engines' Industry in the Australian Market." April 9, 2020. https://ivypanda.com/essays/japanese-greener-engines-industry-in-the-australian-market/.


IvyPanda. "Japanese Greener Engines' Industry in the Australian Market." April 9, 2020. https://ivypanda.com/essays/japanese-greener-engines-industry-in-the-australian-market/.


IvyPanda. 2020. "Japanese Greener Engines' Industry in the Australian Market." April 9, 2020. https://ivypanda.com/essays/japanese-greener-engines-industry-in-the-australian-market/.


IvyPanda. (2020) 'Japanese Greener Engines' Industry in the Australian Market'. 9 April.

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