After a sustained period of progressive growth, 2014 has been a flat year for new vehicle sales in Australia — and nowhere has the market been hit harder that at the cheapest end.
To the end of July, the Micro and Light vehicle segments are both down at a rate far in excess of the contraction of the market overall, having fallen by 31.7 per cent and 9.8 per cent apiece compared to the overall market drop of 2.4 per cent.
This translates to a drop in sales in the micro space from about 14,500 units to 9900 units year-to-date, and a drop in light car sales from about 65,000 to 59,000 units.
The fact is that right now light-cars are safer and more efficient that ever, but fewer people are buying them. Furthermore, with the economy supposedly in less robust shape now than in recent years, it seems unusual that the cheapest cars on offer have suffered the most.
One clue could be the growth in small SUVs (up 17.3 per cent), bucking an overall market drop of 2.1 per cent. Furthermore, sales of key players within this segment — think the Holden Trax, Suzuki S-Cross, Nissan Juke, Ford EcoSport, Peugeot 2008, Skoda Yeti and Mitsubishi ASX — have more than doubled in 12 months from 9000 units to about 21,000 units.
It is clear that many buyers are opting for high-riding versions of these light-cars: it is not unreasonable to think some people might opt for a Holden Barina-based Trax (3648 sales this year) or a Ford Fiesta-based EcoSport (1031 sales YTD).
It might also be that a glut of low-kilometre demonstrator models already registered in end-of-financial-year volume pushes (and therefore not a part of VFACTS new vehicle registrations figures over recent months) moving out the door, alongside late-model used cars at discount rates.
Let’s also not forget that several key players at this end of town, notably the once class-topping Mazda 2, are nearing the end of their shelf lives and stand poised to enter new generations later this year.
One should also remember that many dealers will try to up-sell buyers into a higher segment with bigger margins. A typical margin for a dealer in selling a sub-$15k car even at full retail may only amount to a few hundred dollars at best.
One thing that is clear is that people certainly aren’t buying more new cars from the (more profitable) next segment up from light cars. The Small segment, dominated by the Toyota Corolla and Mazda 3, is also down, by 3.8 per cent.
Ultimately, whatever is going on, the numbers speak for themselves. A quick scroll through the Micro and Light segments makes for rather grim reading for most brands.
Every single Micro car bar the Fiat 500 (up 101 per cent thanks to sharper prices — albeit recently increased ones — and more marketing) is down in a worrying way. The Holden Barina Spark, Mitsubishi Mirage, Nissan Micra and Suzuki Alto are down between 20 and 50 per cent.
Volkswagen’s decision to stop importing the pint-sized Up! has also taken 1100 sales out of the market (1250 units this time last year to 165 this year). The German brand’s local arm seemingly just could not turn a profit on such a cheap car in such a pricey market.
Moving up a segment, cars such as the Ford Fiesta (down 19 per cent), Holden Barina (down 28 per cent), Honda Jazz (down 30 per cent, though it has just been replaced by an all-new model), Kia Rio (down 9 per cent), Mazda 2 (down 21 per cent), Nissan Almera (down 82 per cent), Suzuki Swift (down 22 per cent) and Toyota Yaris (down 13 per cent) paint a bleak picture.
Alone in growing in significant volume are the Hyundai i20 and Accent models (up 15.5 and 12.3 per cent each, the former now being the class-leader thanks to sharper deals) and the Volkswagen Polo, up 19 per cent and now on sale for sharp runout pricing, with an upgraded model now just months away. The Honda City sedan is up 175 per cent, but from a very low base.
The fact is, right now, Australia’s cheapest cars are performing at a rate far worse than the already flat market overall. Buyers with a limited budget are clearly either holding onto their current cars, or spending their hard-earned elsewhere, largely on the new array of mini SUVs.
Are you in the market for a light-sized car? Have you been up-sold into something bigger or taller? Did you opt for a used car or demonstrator instead? Let us know…