Car dealerships face imminent collapse

The situation facing Australia’s car dealers was already dire, given new car sales had fallen for 26 consecutive months to levels not seen since February 2010:

Yesterday’s import data from the Australian Bureau of Statistics was another nail in the coffin, with car imports hitting a 10.5 year low:

Back in April, The AFR reported that many car dealerships were “expected to collapse within months”.

In light of this data, many dealerships must now be beyond the point of no return.

Leith van Onselen

Comments

  1. For many (most) people, they know exactly what car they want so why not buy it directly from the manufacturer and save the dealer costs?

    • True, all that advertising, Ming Molls (h/t J.Cadogan) and finance Mgr roles that could be avoided just buying direct from the factory. It’s akin to a Parasite that has planted itself between you and your favorite meal and takes 30% for itself without providing any value.

          • BubbleyMEMBER

            Sellers can already do it for themselves through “For Sale by Owner” Gumtree and even the Facebook Market Place.

            Interestingly most of the sellers have a massively inflated sense of the properties value. The ones I’ve seen are way overpriced to comparable properties in the same area, which I can only put down to greed.

            Unsurprisingly, they do not sell.

      • Like private health insurance/hospitals. Like NDS taking 50% in your allocation and so on. Our collective governments must have looked at the car dealership system when deciding on how to “make it cheaper” with outsoucing.

    • call me ArtieMEMBER

      Hi Jason. Maybe that really is the future. Order online, select options, car turns up at your door a few weeks later.

      Possible problems:
      a) Dealers usually organise finance, who would do that?
      b)There’s usually a trade-in to take, what to do about that?

      Even so, seems reasonable. Dealers just become service agencies for warranties etc

      • billygoatMEMBER

        Harvey Norman do finance like many other. Credit, interest free, after pay, lay-bys what ever name you give it – still a beast that feeds on credit. Sure there’s an for it.

        Same with trade ins. For show only. Plenty of companies around that sill appraise car – even junk and take it away a couple of grand either way.
        All dealerships in each state pretty much owned by 1-3 major players:))

      • I went through that process when I bought our Tesla. Admittedly there are fewer permutations there but it was a quick trip to the Tesla owned showroom for a test drive, then ordered everything online. They now supply a mobile service “mechanic” so in most cases I don’t even need to take the car to the service centre. The mobile guy even repaired the side mirror when the missus ran into a pole.

        • TheRedEconomistMEMBER

          All the money is in maintenance and servicing. That is what keeps most dealers afloat.

          • darklydrawlMEMBER

            EV’s are going to kill that off. They have a handful of moving parts vs an internal combustion engine and need far less regular maintenence and fluid top ups et al.

      • drsmithyMEMBER

        Many vehicle manufacturers offer finance as well (eg: 3% from VW).
        The leasing company my employer uses (sgFleet) claims to take care of tradein / selling previous vehicle for you.

      • Know someone in the new / used car game and finance is a big cut of their profit, that and then up selling the extras.

  2. Well, with the uncertainties of work, many people could make do with their current car for a few more years without any real hassle, and this is a real problem for these dealers. If one is WFH, you sort of wonder if the 2nd car is really worth the additional expense.

    • Jumping jack flash

      +1
      When we moved from country NSW to Brisbane the first thing to go was the 2nd car. Public transport works great 85% of the time.

      • drsmithyMEMBER

        Crikey, I would have thought you’d need a second care more in the country.

        We only have one (+ a motorbike for when it’s only one person who has to go somewhere), but we also live across the road from a train station and have bus stops right outside, so public transport does for probably 50-75% of trips.

    • Iron HorseMEMBER

      Agreed, with WFH we cancelled the registration on our main car and mostly drive our second car. We do however have a few cars on conditional registration which helps when needed.

      • Could you explain conditional rego? I have an ev, but kept the old bus for backup but hardly drive it. Cheers

        • Iron HorseMEMBER

          In SA if your car is older than 30 years and you are a member of a car club you are entitled to put that car on Conditional Registration. Registration is significantly cheaper, however you must fill out a log book entry every time you drive the car and are only entitled to drive it 90 days per year. I hope that helps.

  3. I have been folowing prices closely and of late the sales have been going for top dollar. Dealers putting prices up on car sales . com

    Purely free money handouts I think

    • Jumping jack flash

      Our next door neighbour bought a new car, looks like it would be worth around $10K.

  4. Love it. One of the only economic indicators that the RBA/Treasury hasn’t yet found a way to distort.

  5. Car dealers in WA are desperate for used stock, never busier so they tell me. I was offered $4k more for my Hilux than the Redbook range states, which in my experience is pretty accurate. Was intending to sell it then buy something else later in the year when the asset write off/ job keeper, etc have wound down.

    • truthisfashionable

      Interesting. I wonder if its the same here in NSW.

      I think we are seeing the flow on effects of less new car sales over the past 2 years, it makes finding a slightly used car harder, but also the depreciation curve seems screwed at the moment.

    • Anything that can tow a caravan is in demand, as are caravans. Can’t go to Bali so off to Busso it is.

  6. SoCalSurfCreeperMEMBER

    Tesla only sell direct wherever not legally required to sell through dealers. I believe they also refused to sell at all in some jurisdictions that tried to force them to use dealers.

  7. billygoatMEMBER

    Only thing keeping Toyota Brighton in business from my handfull of Saturday visits was /is our Cheye Knees friends and their extended families. Whyte female like me garnered zero attention. Didn’t want my money as clearly getting plenty from elsewhere.

    • I had that last year. Walked into a showroom in Auckland, the sales people ignored me, walked past me and went straight to the Asians. So when I shelled out and bought my BMW M2 Competition I made sure that dealership knew I’d bought a new car, and not from them.

  8. drsmithyMEMBER

    I drove down the magic mile a few days ago for the first time in a couple of months and noticed at least four of the used car yards were a) empty and b) had for sale/lease signs out the front of them.

    Still doesn’t seem to be reflected in car prices yet (at least not the ones I’m interested in).

      • drsmithyMEMBER

        Primarily watching VW Tiguan Allspace, Volvo XC60 and BMW X3 – the Golf is getting too small for two kids.
        Also keep a loose eye on BMW 4xx/F33 convertibles so I can get my midlife crisis underway. 🙂

        • Anything in the VW Audi stable will cost you a bomb as they break all the time.
          Get the BMW. They are great. More expensive to service than a jap car but oh so nice to drive.

  9. Why aren’t you guys importing second-hand cars direct from, say, Japan? It’s not like you have a local manufacturing base to protect any more.

  10. Twas looking over some older emails this morning before this article appeared … I came across a quote from a dealer for my new-to-me 4WD beast. I had a jammed passenger seatbelt and a little screw cover missing on the passenger handle on the A-pillar.

    The dealer wanted just under $600 for the passenger seatbelt assembly and $140 to fit it. Goodness knows what they would’ve charged for a little screw cover … !

    I found me a willing and friendly car dealership in Beijing …

    I ordered two seatbelt assemblies – one for the passenger and one for the driver – along with a replacement handle with its two screws and covers … 38US for each seatbelt and 7US for the handle.
    The whole lot in Australia for under $300 AUS. This includes the special shipping for explosive devices.

    A saving of $600 on the one seatbelt and I have the driver’s side spare just in case …

    I’m thinking of starting a buyer’s group online …

    • Jumping jack flash

      Quite some time ago my then 3yo daughter decided that the console arm-rest thingy in my car was a great place to put 100s of little holes into with a pencil.

      I called around the wreckers for a replacement and they found one at the Gold Coast and wanted about $300-400 for it.
      I declined, astounded, saying that I could find one cheaper than that. They said good luck.
      Went to eBay and found one for I think it was $80, delivered, from the UK of all places.

      The gouge is strong.

      Totally understandable though. The yard owners need to be able to obtain the correct amounts of debt that are absolutely essential, on whatever money that a wrecking yard can generate. If you can’t use it to get eligible for the correct amounts of debt, what’s the point of running one?

    • GeordieMEMBER

      I bought an electric window actuator for the Falcon for $65 delivered as opposed to $270 locally. Installed no problem, broke six months later. Bad luck or get what you pay for? I honestly can’t tell but repairing the broken new one is on the cards if I ever have the time.

      • Yep. Did the same with Audi A4 driving lights. Locals wanted $300 ish for the part and then ”labour” to install. Bought one from a US online site for about $80 delivered, and a couple of YouTube vids later it was in.

  11. If you adjust car sales for growth in population we are probably at a 15 to 20 year low.