Car sales strong but GFC not over yet

The Australian new-car market may be roaring along at a cracking pace -- sales are up 18 per cent so far this year -- but the boss of Australia's top-selling car brand isn't prepared to say the Global Financial Crisis is over.

Toyota Australia senior executive director of sales and marketing, David Buttner (pictured), says the Australian economy is "definitely in recovery mode" but stopped short of giving it the all-clear.

"The signs are good but [the GFC] is not completely behind us yet," he told a media gathering at Toyota's newest Australian dealership, in Adelaide, this week.

"While I remain very positive ... you've got to remember some of the demand that has been fulfilled this year was on the back of some very expensive [government] stimulus packages last year."

The managing director of the dealership, Paul Crawford, said much of Australia was in a "two speed economy at the moment".

"The mining and exploration industries are very positive and ordering a lot of vehicles, but the retail side of the market is still quite subdued."

He said there was clear evidence much of the strong start to this year can be attributed to orders placed last year.

"With the stimulus package we definitely pulled forward a significant amount of sales. We're delivering cars now that were ordered last year," said Crawford.

"However, we are seeing a shift. What we're seeing on the showroom floor now is that people are back into thinking about upgrading their housing and upgrading their cars."

Buttner said business confidence and consumer confidence are climbing again -- and rising interest rates are unlikely to dent sales in the near future.

"According to research I've seen, it would take a two to three per cent swing in interest rates before you may start to see an impact on demand for cars," Buttner said.

"Looking at the [home] auction results, the recent interest rate rise didn't seem to faze too many people on the weekend."

He said about 40 per cent of new-car buyers pre-arrange finance, while more than half organised finance at the dealership.

Crawford said the Australian new-car market would be back to "true demand" by the end of the third quarter of 2010.

"There's new buoyancy and optimism about employment prospects. We basically have full employment [compared to other countries]. And now the GFC is diminishing in Europe and the US, it's amazing just how resilient the Australian psyche is about the economy.

"By the end of the third quarter we think we will be back to true demand."

Meanwhile, the strong Australian dollar will continue to help importers, some more than others, said Buttner.

"Currency can work for you but it can also work against you," Buttner said, adding that most makers would likely add equipment to vehicles rather than introduce cheaper prices.

"Cutting prices can hurt your resale value, so it's better to provide better value rather than a discounted price."

In recent years Korean currency has tended to move in line with the ups and downs of the Aussie dollar (handing Korean brands and Korean-sourced cars an advantage), whereas the Australian dollar has not necessarily been that closely aligned with movements in US and Japanese currency, he said.

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