Panic grips car dealers as sales collapse

The situation has gone from bad to diabolical for Australia’s new car dealerships, with the Federal Chamber of Automotive Industries (FCAI) reporting the 29th consecutive decline in new car sales in August:

As shown above, new car sales have collapsed to around Global Financial Crisis levels, despite the Australian population being 4 million people larger today than it was then.

Indeed, new car sales 29% year-on-year in August, with annual sales also tracking 24% lower than their March 2018 peak.

Yesterday’s international trade data also revealed that new car demand has collapsed, with imports down 33% year-on-year in July and annual imports down 21% from their April 2018 peak:

Not surprisingly, a whiff of panic has gripped the FCAI:

Tony Weber, chief executive of the FCAI, said that while the overall industry was showing some response to stimulus packages, the story for Victoria was less than promising…

“We’ve seen 29 consecutive months of diminishing sales in this industry, and there’s no doubt our members are feeling the pinch. The move to commence the reopening of industry and markets, especially in Victoria, needs to start as soon as possible.”

The chief executive of Australia’s largest car dealership group, Eagers Automotive’s Martin Ward, noted similar:

“We will burn cash every 30 days in the Victorian market,” Mr Ward said. “Lockdowns are devastating.

“I’m just very, very grateful that we are able to trade in the rest of the country”…

While trading in states outside of Victoria had started to improve in July and August, Mr Ward said it was still soft. “It is not above last year,” he added.

There’s no way to sugar coat this data, which is disastrous.

The economics of car dealerships is also not exactly robust, with many relying on high turnover and margins of less than 1%.

Expect massive consolidation as many dealerships go to the wall.

Leith van Onselen
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Comments

  1. Heard that with Stage 4 restrictions if you wanted to buy a car from a Victorian dealer, they now have to tow it out to you for a test drive and back again – it’s pretty much dead.

  2. The90kwbeastMEMBER

    Surely most of the new car sales boom in Australia over the past 15 years is highly correlated and attributable to the property boom and the ‘wealth effect.’ I fully expect this to go into reverse the next few years.

    Someone please do a combined chart with Australian property plotted against new car sales, the correlation will be about 0.7 or so I’d say!

  3. Haywood JablomyMEMBER

    It’s a cyclical business. Astounding how many business owners, some with the flimsiest of business models, seem to take this attitude that revenue must steadily increase year on year into perpetuity. That would be nice, but in most cases doesn’t reflect reality.

    • wait, that reminds me of a story I read the other day. there was this Pharoah guy and he had a dream about 7 fat oxen eaten by 7 thin, or somesuch, and then this dude Joseph said you have to put some food aside now to cover the seven bad years.

  4. alwaysanonMEMBER

    We have a six year old Kia Sportage but it only has 35,000kms on it (I stopped having to commute to work shortly after we bought it so it is just for trips to the shops and the to the in-laws now). I have never loved it (long story but I got a crazy almost 20% off deal on it through an old job who was a vendor to Mobis) and so am very tempted to try to upgrade while it seems to be a buyer’s market.

    When I force myself to pin down real reasons to do it though it is really just more comfy seats (drive back and forth to the in-laws 2.5 hrs each way and they are a bit hard for the long drives) and autonomous emergency braking (since that might save somebody’s life and my wife rarely drives because she has an irrational fear of hitting some kid who jumps out in front of her). But both things are very much nice-to-haves, though, and I have to keep reminding myself that I can/should just run this into the ground for another 5 years and wait for the EVs to get mainstream or autonomous driving to be a thing etc…

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