Australian car dealerships face collapse

The Federal Chamber of Automotive Industries (FCAI) yesterday released new car sales for the month of July, which revealed that sales have collapsed to December 2009 levels following 28 consecutive months of decline:

New car sales fell by 12.8% relative to the same month of 2019, with annual sales volumes 22% below their March 2018 peak.

According to FCAI CEO, Tony Webber:

“The Australian automotive industry, like many sectors in the Australian market, continues to face challenging and difficult conditions, exacerbated by the COVID-19 pandemic.

“The extended Stage 4 Restrictions which have now been invoked in Australia’s second largest market, Victoria, will no doubt further challenge the industry during the coming months”.

Meanwhile, import data released on Tuesday by the Australian Bureau of Statistics revealed that motor vehicle imports collapsed to their lowest level since the Global Financial Crisis in 2008, down 59% year-on-year:

This suggests that unsold inventory is piling up at dealerships amid the collapse in demand.

A few months back, The AFR warned that many Australian car dealerships were “expected to collapse within months” amid razor thin profit margins and shrinking sales. Victoria’s car dealerships were cited as being especially exposed.

The situation has obviously worsened since then, with Victoria’s hard lockdown likely to be the last straw for struggling dealerships in the state.

Leith van Onselen
Latest posts by Leith van Onselen (see all)

Comments

  1. If they manage to match the 2019 sales figures for last 5 months of 2020, then they will manage 940,510 sales for 2020, just exceeding the 937,328 in 2009. If it is lower, then sales will be worst since 909,811 in 2003.
    Australia’s population has grown by 30% since 2003.

    • PaperRooDogMEMBER

      Yep, not looking good. Though covid has just brought the low number forward several years as the superior economic manages had already begun to crush car sales with their per capita recession, caused large part by thier surplus obsession at the same time as running a big Australia migrant stream. More people but less money in the economy, Josh is the sharpest potato in the room.

  2. Are you sure that the fall in imports is due solely to demand and not a supply problem as well?

    • I can’t speak for autos but there are serious supply issues in other product areas, so logically it’s reasonable to assume autos are impacted.

    • As an industry insider there are definately supply problems too:

      American built: Jeeps, Ford Mustang, Toyota Kluger – all those factories have been on shutdown or limited production. Jeep aren’t expecting any more metal to hit the ground in Australia until December. Next Mustang shipment not landing until early Oct, Kluger somewhere around the same.

      Anything Japanese / Korean / Thai / Chinese built : The majority of vehicles. Not impacted by factory shutdowns yet, but there are some delays in shipping (typically 3-4 additional weeks)

      Anything European built: Impacted by factory shutdowns, and supply chain is already long 9-10 months. You would find that anything that was scheduled to be built in Europe during the first half would normally be on water now… but as the factories in Germany, Italy and France have been closed – most of these imports are now not arriving.

      Indian & Indonesian built: Some Fords & Hondas. Plants are pretty much shut down.

      • Looking to buy a dual cab in Perth- literally nothing around. Understand couple updates due, did they sell out of existing stock earlier than expected. Even the Ranger is hard to find. Second hand prices have understandably been bumped up- thinking I will be far better off to wait until October before doing anything?

  3. reusachtigeMEMBER

    I’ve always found that people into cars have really small c0cks! That’s why chicks aren’t into them at all. Oh wait.

    • I was into cars once – then I lost interest and had to buy myself a larger set of underpants.

  4. Margin on car sales is negative, profit comes through sale of poor insurance and car loans, pretty sad. The other side of dealership (service) is pretty resilient in a downturn, but not sure if going to the dealer to service is the norm in Au.

    • Hill Billy 55MEMBER

      But there are not many racking up the K’s these days, so that’s postponed too. We had our dealer trying to book our car in after 3 months for our normal 6 month service. They are getting desperate.

      • MountainGuinMEMBER

        The positives for sales would be people being too worried to use public transport, post lock down those with money may have domestic driving holidays rather than international flights and places like WA being pretty free of covid. Downsides are low Kms driven now, unemployment and WFH mean less need for primary car and very low need for extra cars, many can’t afford car finance and im guessing less people wanting to have the newest shiny car for their social image.
        So new car sales would seem to remain stuffed, but second hand car sales may keep ok transactions levels if people adjust what cars they have.

        • Cheap second hand cars have been flying out the door – was on MB a couple of weeks back.

    • Dealer $$$$ has always been in two main areas:

      1. Finance commission on new car sales
      2. Draining peoples wallets through the service departments.

      Yes, people are doing less kms because of lockdown – but there are items such as batteries that actually die faster through lack of use and lower kms – so there are still ways they can milk money out of people.

      • Yep! A guy I know in the area runs a car workshop, does some repairs but mainly servicing. Has a very nice home on a large block of land on one of the best streets.

        To your point ..

    • Yes – totally agree.

      Toyota saw record sales on their Landcruiser Sahara model in June…. as people took advantage of the $150,000 instant asset write off. They also had record months for accessories sales as bogan tradies bought new Hilux’s and kitted them up with top line trays, sidesteps and bullbars. Similar numbers at Ford with the Ranger I’m hearing too.

      Basically if it wasn’t for the $150,000 instant asset write off program – more dealers would have fallen over already, and we probably would have retailed 10,000+ less vehicles between April and June.

        • Ended 30th June. It’s usually $20,000 or something, but this year was boosted to $150,000 to boost spending.

        • Still current. Was extended to 31 December. A Sahara would only qualify for write off up to the luxury car tax limit- plenty of disappointed buyers ahead or follow up queries from the ATO.

          • I’m sure the purchase of Saharas was not what the Treasury had intended, but … ya know … the unintended consequences of gubbermint schemes and all that.

      • scootytootyMEMBER

        Ahh, that explains my brother in-laws purchase of a sahara and taking it straight to ARB to be fitted with EVERYTHING, even though it will never see dirt.

      • The depreciation cost limit applies to a Sahara so the benefit of the $150k write off is not what it seems.

  5. Of dear! You mean those who (over)built BIG SHINY DEALERSHIP showrooms with loose money have financial trouble???? My heart bleeds!

    • billygoatMEMBER

      Yes same ones whose staff ignore Whyte faces & Whyte moneys . Fail. Cry me a river

    • blacktwin997MEMBER

      You should see the arse end of Swan Street Richmond, past Burnley station – in one contiguous row there are massive ugly concrete box dealerships for Audi, Lamborghini, Lotus, Rolls Royce and Bentley.

    • 🙂 KISS principle at work. Kinda what Rudd did except he threw the money straight into the dealerships – much more ”éfficient” at rescuing his mates.

  6. “This suggests that unsold inventory is piling up at dealerships amid the collapse in demand.”

    Alternate take, and the one noted by the automotive industry.. many models are supply constrained because of the shutdown/disruption of manufacturing overseas.

    Look I don’t think they’d be selling bajillions more if they could get them in.. but I also don’t think stocks are piling up.
    The two have occurred together.. disruption in supply and disruption in demand.

  7. Jumping jack flash

    2017 lines up nicely to where I believe our so-called “Minsky moment” occurred, possibly induced by the banking RC, but maybe not – where the inadequate amounts of new debt created over the preceding years finally was not enough to sustain the debt that was already created, without the economy imploding from the interest payments which were up around 100 billion each year, possibly more I don’t know.

    After that point it has all been downhill. Fortunately for us the virus happened…