Federal election could slow new-car sales

The peak body of the Australian car industry has warned that the imminent Federal election could put the brakes on the booming new-car market.

The warning comes despite strong sales this year – including the biggest month on record in June and the third-ever financial year to eclipse the 1 million mark.

The chief executive of the Federal Chamber of Automotive Industries, Andrew McKellar (pictured), has revised the calendar year forecast to 980,000 sales.

McKellar told the Carsales Network: "Look, I hope I'm wrong but all the indicators are there. We have typically seen downturns during election time. People tend to hold off any big financial decisions until they know who's in power and have a better idea of what the policies will be."

He said another factor contributing to the 980,000 forecast is possible interest rate rises.

"We have seen a lot of people pulling their new-car purchases forward before the end of financial year this year, to get in while interest rates are low. And a lot of businesses pulled their new-car purchases forward last year to take advantage of the Federal Government's tax incentive. At some point demand will be met. We have put a lot of new cars on the roads in the past 18 months despite economic circumstances."

He hastened to add that 980,000 is "still a strong number" and that "at the end of the day it is just a number".

The Australian new-car market has only eclipsed 1 million sales in a calendar year twice before.

One respected industry insider, who did not want to be named, said that July sales will look strong because of the high number of carry-over orders from the boom in June – but order intake has already begun to slow.

"Everyone gets excited when the [sales] numbers come out, but what [the media] doesn't see is order intake – and order intake is down across the industry, so we'll see the effect of that in August and September. Throw the election in, and there could be a big oversupply of cars towards the end of the year."

At the premium end of the new-car market, the boss of Jaguar Land Rover in Australia, David Blackhall, believes the election will dampen buyer enthusiasm.
"Buyers keep their hands in their pockets, it's going to be tough for sure," he said. "Elections are always bad for new car sales."

Porsche Australia boss Michael Winkler told the Carsales Network: "It depends on the mood going into the election. We are more dependent on feel-good factors than anyone. Having the money is one thing, being prepared to spend it is another.

"I think there is a good chance we'll still break 1 million sales this year, but it's a matter of election timing. If the election is called early, we will have time to make up sales in the last few months of the year.

"If the election happens in November, then the recovery will spill into the new year. Either way we will have to work through it at some point."

Doug Dickson, the boss of Mazda Australia, which has one of the highest percentages of private buyers among its customer base, believes car buyers won't be discouraged by the mooted interest rate rises.

Dickson told the Carsales Network two months ago : "Consumer confidence is largely back to historic high levels. Monthly indicators have leveled out although rate rises knock some of the heat out of expectations around personal situations over the next 12 months.

"That said, however, remember interest rates are generationally low. If they get back to 5 or 5.5 per cent, which is where many think the Reserve Bank is heading, that's still very low.

"I'm old enough to remember paying a mortgage at 18 per cent interest, so I expect 5 per cent is no trouble at all for most people."

But, he added, there's probably been a "three to four month lag" between consumer confidence levels and the impact on sales.

"To be frank, we were getting a bit concerned that maybe the private buyer won't come back after [the global financial crisis]. But thankfully we are now seeing definite signs that private buyers are coming back into the market."

In the first six months of this year, vehicle sales to private buyers are up 17 per cent, ahead of business and government fleets (both up 10 per cent), according to FCAI figures.

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