Revealed: the Aussie car industry’s dirty secret

Australia’s new car sales statistics have again been cast in doubt by claims distributors are regularly misrepresenting between 10 and 30 per cent of reported sales.

In the wake of another bumper year in which the new car market exceeded 1.1 million vehicles, senior industry figures have revealed that in extreme cases, manufacturers are falsely reporting dealer demonstrators, fleet vehicles or company vehicles for as many as six in every 10 sales, in a bid to meet internal targets.

The national dealer and industry bodies have put the average number closer to one in every 10 cars.

Irrespectively, the Federal Chamber of Automotive Industries (FCAI) says it evaluating ways to improve accuracy of reporting. There is one suggestion this will soon include cross-referencing official VFACTs figures against official state and territory registrations to regulate the practice.

“This is not a sustainable way of doing business,” said Volkswagen Australia chief executive Michael Bartsch.

“If you have a look at the numbers over the last quarter of 2018 in particular, the level of numbers reported as company cars, fleet deals and demonstrators is completely out of proportion with the overall market. There are some brands where it’s representing anything from 40 to 60 per cent of the sales they’re reporting.

“It’s not unusual to see some brands with mid 40 per cent to high 40 per cent of their reported sales being company cars, demonstrators and fleet. They may be doing it but I’m fairly sceptical.

“There is a general consensus that 30 per cent of what’s being reported is BS,” Bartsch told carsales.

The Australian car industry uses a self-reporting structure based on registrations to document new car sales. This opens the door to manufacturers claiming a demonstrator registration as a new car sale, for example.

While cars falsely reported as sold do eventually find their way into the used market, often months later, there are concerns the practice misrepresents the true state of the Australian car industry.

Against the backdrop of widespread misreporting, national sales dipped 15 per cent in the month of December, including a passenger car market that was down 26 per cent. It was the worst December result since the Global Financial Crisis in 2008.

Overall, the Australian new car market experienced a 3 per cent downturn in 2018, amid falling house prices, the tightening of the banking and finance sector and a dip in consumer confidence, among other factors.

Industry sources concede all car-makers fiddle with their sales reporting in some capacity, however there are a small number that are particularly synonymous with the issue. One insider claims five brands contribute to 80 per cent of the problem.

The rogue reporting is not limited to mainstream marques, either. One luxury marque attributed a dive in its 2018 sales to a glut of vehicles passing through dealerships that were already reported as sold 12 months earlier.

“What you’re seeing is not the real downturn,” the source told carsales.

Similarly, dealers have been imposed with unreasonable pressures in order to satisfy their brands’ volume targets industry bodies claim.

The Australian Automotive Dealer Association said the issue worsened in 2018.

“A number of months ago we were receiving increased reports from members of vehicles being pre-reported among certain brands. We have since been working closely with the Federal Chamber of Automotive Industries (FCAI) and believe that the practice of pre-reports has subsided,” said AADA chief executive David Blackhall.

“I am skeptical of the claim that 30 per cent of all new car sales are pre-reported. The level of pre-reported vehicles may be high among certain manufacturers, however, there are a number of major market players who do not engage in this practice.

“We ran a longitudinal sales-weighted study over a number of years and found that less than 10 per cent of vehicles are reported as sold when in fact they are not,” Blackhall stated.

FCAI chief executive Tony Weber vehemently refuted allegations put to him that 30 per cent of new car sales were regularly falsely reported.

“It is absolute nonsense of the highest order,” he said.

“There are people out there who should know better. That is absolutely wrong. If it’s 30 per cent, that’s 400,000 cars. Where are they parked?”.

Asked whether he accepted misreporting as a widespread problem, Weber said: “I acknowledge that we have a responsibility to have the most accurate reporting numbers possible.

“What we have done for many years is that we have taken on continuous improvement. As the technology improves, we put in place standards to improve the quality of the data.

“People have shown their methodology to me,” Weber said of the industry revelations.

“These people are guessing. It’s a finger in the breeze process.

“There are over 400 models on the road. Consumers go to a dealership, they want to drive a car before they buy it. Those cars need to be available across the country. Demos are an important part of the market. Fleet sales are a valid element as well.”

It is understood the FCAI will revisit the issue at a board meeting in March.

Despite the progress, many industry participants remain sceptical of the OEM’s ability to honestly report figures.

“We’ve had a downturn in the market, but rather than resorting back to whether we have a fair market share, manufacturers are saying ‘how do we keep that volume?’," questioned one senior executive on the basis of anonymity.

“It is to me the biggest issue we have in terms of having a working relationship with the dealers, of having ethical behaviour within the business. Where none of us want to be accused of misrepresenting facts, we are indeed misrepresenting facts as an industry on a fairly major level. It has to stop.

“No-one is squeaky-clean. If you have someone that rings up on the last day of the month, and substantially change the number of vehicles imported by a brand by over 1000 units, it then overstates the size of the market and understates the market share of other brands that don’t do it.

“This then has flow-on consequences on the perceived value of a franchise. It has flow-on consequences in terms of consumer’s understanding of what brands are successful and what brands are unsuccessful.

“And, of course, it then significantly impacts the way a parent body sees our market and a manufacturer’s market share. It’s not a healthy situation,” the executive stated.