Car dealers are running low on new vehicles to sell after being caught short due to an unexpected increase in demand in June – compounded by factory shutdowns during the coronavirus crisis – however industry insiders say the market is still a long way from a full recovery.
Preliminary figures for new-car sales in June have industry insiders predicting it will be the second month in a row of growth after the market posted a 30-year low in April and a 23-year low in May.
The early data – based on confidential information shared among the Top 10 car brands a week out from the end of the month – estimates between 85,000 and 95,000 new vehicles will be sold in June, compared to 38,926 deliveries in April and 59,894 in May.
If the estimate proves to be accurate, it could be the strongest new-car sales result in the past 11 months – and either the weakest June since 2011 when 96,000 cars were reported as sold, or the weakest June since 2002 when 78,000 cars were reported as sold.
Official data compiled by the Federal Chamber of Automotive Industries is not due to be released until the third business day of the following month, which is this coming Friday.
Numerous multi-franchise dealers contacted by CarAdvice have expressed concerns they are about to run out of popular models because demand was stronger than expected, and they either weren’t able to order cars due to factory shutdowns, or they didn’t place orders amid uncertainty over how long the coronavirus crisis would continue.
June is historically the biggest month of the year for new-car sales due to end-of-financial-year deals, and businesses reducing their taxable income by purchasing work-related vehicles.
Sales of utes and vans are particularly strong, dealers say, with certain variants of popular models such as the Toyota HiLux and Ford Ranger utes – the nation’s top two selling vehicles – in short supply.
Certain variants of vans such as the Toyota Hiace, Ford Transit and Volkswagen Transporter are also thin on the ground, and some dealers who have stock aren’t swapping them with dealers desperate to fill orders.
CarAdvice has been told US pick-ups, such as the Ram 1500 and Chevrolet Silverado, are about to post one of their best sales months in their short time in Australia, despite most models costing in excess of $100,000.
The CEO of the Australian Automotive Dealer Association (AADA), James Voortman, told CarAdvice: “Dealers are reporting a significant surge in demand in June after sales plummeted in April and May.”
Mr Voortman said “pent-up demand, the instant asset (tax) write-off, and interest driven by end-of-financial-year offers, have brought consumers back to the showroom.”
However, Mr Voortman, who represents 3500 new-car showrooms nationally, emphasised it is “too soon to declare the industry downturn as over”.
“Sales have lifted and stock for certain vehicles is running low, but we are still a long way from a full recovery across most sectors of the market,” said Mr Voortman.
The Federal Government recently extended the $150,000 instant asset tax write-off eligibility period from the end of June 2020 to the end of December 2020, in an attempt to kick-start the economy.
It means tradies and businesses can claim the expense and receive the full deduction in one financial year rather than spreading it over several years.
However, there is widespread confusion about how it applies to cars. In most cases, the instant asset tax write-off applies to motor vehicles valued up to $57,581.
The $150,000 limit applies to work vehicles that can carry more than one tonne, or nine occupants or more.
It means some of the more expensive utes may not qualify for the $150,000 instant asset write-off because, despite their size, they are not rated to carry one tonne or more.
However, it is believed a portion of the business expense (up to $57,581) can be claimed in a lump sum in one financial year, and any balance beyond that would need to be claimed in subsequent financial years.
The car industry, car dealers, and CarAdvice advise buyers to get their own independent tax advice to see how the $150,000 instant asset tax write-off might apply to their individual circumstances.
Regardless of the widespread confusion, it seems business is booming. However, car dealers are now worried about July, with limited stock due to arrive in the coming weeks.
Official new-car sales data is due to be released by the Federal Chamber of Automotive Industries (FCAI) this coming Friday. We will have full coverage and analysis when the embargo lifts on the day.
June new-car sales results
2020: 85,000 to 95,000 (unofficial estimate, preliminary forecast)