Australia's manufacturing sector is a declining sector, having seen over 125,000 jobs dry up due to the global financial crisis (Biddle 2013). With declining demand for Australian-made vehicles (Biddle 2013) and a rapidly changing global economy, car manufacturers have decided to cease vehicle production in Australia. With the disappearance of an entire industry, a large proportion of skilled workers will be left without work, leading to increased unemployment and a loss of skills no longer needed in Australia. The decision could have drastic effects on the economy, as the flow-on effects will have consequences for other sectors, which are heavily dependent on automotive production. The state of manufacturing in Australia can be analyzed using international trade theory to better determine the factors influencing this change. Product life cycle theory is a process in which a product is developed in one country and over time neighboring countries begin to develop similar products and seek to import (Hill 2013). While not an accurate way to justify the decline in demand for Australian-made vehicles, the process can be seen in the automotive industry. When countries with different factor endowments began producing cars, they were able to produce vehicles more efficiently in their own countries and then import the final product into Australia, putting pressure on the domestic market. As the supply and availability of imported cars has increased, demand for Australian-made vehicles has dropped dramatically. This decline is illustrated in the change in Australia's best-selling cars. In 2002 the three best-selling vehicles were produced in Australia, where as today only the Holden Commodore features on the list (Biddle 2013)... middle of paper... among the major car manufacturers in Australia to cease production is was the consequence of a change in the economic structure in Australia, which is seeing the end of an entire manufacturing industry. Although an unfortunate outcome, the role of these companies is to remain competitive and generate profits. Despite government support and constant restructuring, major manufacturers have failed to shift consumer demand, which has left plants inefficient. Without a positive vision for the future and negative forecasts, businesses could not remain in Australia without operating at a loss (Economist 2014). The chain of events that led to the demise of the Australian automotive industry was the strong exchange rate, continued tariff reductions and high labor costs which significantly affected the future prospects of vehicle manufacturing in Australia..