New Models
New Models

Why the brakes have been slammed on new-car sales

Car industry hits the panic button after the longest slowdown in new-car sales since the Global Financial Crisis a decade ago.


ANALYSIS

New-car sales have hit the brakes in the biggest slowdown since the Global Financial Crisis a decade ago – and the federal election hasn’t provided the “bounce” the industry was counting on.

While there was an initial surge reported in the days that followed the May ballot, the bounce has turned into a dead ball, according to industry analysts.

“There was definitely a post election bounce but it wasn’t as big as the industry expected and it didn’t last very long,” said David Blackhall, a motor industry consultant and former CEO of the Australian Automotive Dealer Association.

“My feedback from the coalface is that the market is still patchy. It depends on how much bonus money the car companies are throwing around, but the market is still tougher than we’ve seen it in a very long time,” he said.

June was the 15th month in a row that new-car sales hit reverse – and continued the deepest and longest period of decline in a decade.

“It’s the toughest I’ve seen it in 20 years and no-one can see a way out,” said a veteran multi-brand new-car dealer in metropolitan Sydney, who asked to remain anonymous because dealership managers are not allowed to speak publicly on behalf of the brands they sell. 

One theory is that Australians have “new-car indigestion” because three of the last four years saw record sales.

Dig a little deeper and the industry says higher credit requirements have accounted for a larger part of the slowdown than they expected.

Tighter requirements for car loans have blunted the benefit of record-low interest rates and private buyers are still nervous about their financial stability amid weakening house prices, according to market analysts trying to sort through the wreckage of the weakest June sales result since 2012.

“I reckon 30 to 40 per cent of the deals we’re doing now are falling over on finance,” the dealer said. “We never used to measure it before, but now a lot of dealers are keeping tabs. They (customers) either can’t get approval or it takes too long to get approval and they back out of the deal.”

Industry figures show about 88 per cent of all new cars bought by private buyers are funded on finance, about half of that arranged inside the dealership and the other half from outside lenders.

A new-car salesman, representing one of the Top 10 brands in western Sydney, also speaking on condition of anonymity, said: “I’m not experiencing much of a bounce. I’ve had the worst June in my entire career selling new cars. We’re just not getting as much enquiry and you can’t make people buy cars.”

He said while there may not be much sympathy for car sales staff, the slowdown was hitting the hip pocket of the many middle income earners who work in the industry. 

“Commission from the sale of new cars accounts for between 40 and 60 per cent of our take-home pay, depending on base rate and the commission structure,” he said.

“So that means we’re directly earning less, so we’ve got less money to spend on going out or buying things, so I think there will eventually be a ripple effect on other parts of the economy for sure.”

History shows the car industry experiences a dip in demand in the lead-up to Federal elections but recovers soon after.

In the lead-up to the 2016 Federal election new-car sales slowed 1.1 per cent. In the 2013 ballot the market dipped by 2.1 per cent.

However, in the lead-up to the May 2019 Federal election, sales slowed by 8.8 per cent. June was down by 9.6 per cent compared to the same month the previous year.

Joshua Dowling

Joshua Dowling has been a motoring journalist for more than 20 years, spending most of that time working for The Sydney Morning Herald (as motoring editor and one of the early members of the Drive team) and News Corp Australia. He joined CarAdvice / Drive in 2018, and has been a World Car of the Year judge for more than 10 years.

Read more about Joshua DowlingLinkIcon
Chat with us!







Chat with Agent