Seems everyone’s buying new cars… and it seems this increasingly has become a waiting game.
Increasingly, even run-of-the-mill product cannot be simply chosen and driven away. And that’s not all – impending new products are being delayed, sometimes significantly, and allocations reduced. Even securing spare parts at short notice can be challenging.
Covid-19, the virus that closed showrooms nationally for almost all of April also affected production at sourcing points. The consequence of this on supply is what we are feeling now and don’t say it’s a surprise.
In March David Crawford, chief executive of the Motor Industry Association, which speaks on behalf of all new vehicle distributors, predicted as much.
What’s accentuated this, though, is a factor the car industry didn’t figure on: a big splurge out on new cars, primarily by private buyers.
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Who knew? Historically in New Zealand, fleets buy most new cars. That hasn’t dried up, though the primary influence – top tier rental providers securing big counts of cars, often for short-term use, to meet the big tourist demand during peak periods (winter being the highest) – has halted.
It was fully expected that private buyers would become cautious. Vehicle are big-dollar items. Yet, with overseas’ holidays out of the picture, and low interest rates dissuading investment, it seems those with spare spend are putting that money into new vehicles.
Jens Meyer/AP
Demand for new cars is down in New Zealand, but not by as much as expected. It is actually getting the supply from the factories that is the challenging part now.
That doesn’t mean the market hasn’t been hurt; overall, it’s down around 23 per cent year-to-date. Yet that statistic is a telling reminder how much influence tourism has. Remove rental cars and the reduction is far less severe, just four per cent year-on-year.
Certainly, the immediate period of coronavirus high alert had tangible impact. The 2020 market was already expected to be lower than 2019’s; everybody agreed the five-year boom of increasing sales was over. Yet, when that call was made, coronavirus was but a sniffle in a city in China.
By March, we knew a lot more about Covid-19 and, already, car and commercial vehicle sales were down by 37 per cent, a 4929 unit drop, compared to March, 2019. The greater impact in actual registrations was in passenger (down 2961) though in percentage terms, the fall in commercials was higher: 1968 units, a 40.8 per cent decline. In year-to-date terms, the market was off 15.5 per cent.
April and a lockdown for all but a few days obviously hurt more. The passenger count was down 9581 and commercial fell 3549 units, commensurately 90.2 and 91.4 per cent drops. The biggest hit being taken by one-tonne utes, which count in the latter category. Aprils count was down 2773 units, or 93.8 per cent, on April, 2019. Now the market was down almost 32 per cent.
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David Crawford, chief executive of the Motor Industry Association, warned of potential supply constraints back in March.
April was also the month when rental operators ‘defleeted’ passenger car stock en mass; a panic that raised concern about used car residual values being demolished. Many new dealers worked hard to clear stock, fearing they’d be otherwise caught being over-stocked with vehicles that could become sale-proof.
And yet that didn’t happen. May came and was a good business month. Nowhere near as strong as May of 2019, of course: Total passenger being down 3925 units or 32.1 per cent, commercial falling further and the ute market still off – and, year on year, we were 31 per cent off. Yet some brands, such as Toyota, were reporting increased interest in specific models. And all those orphan rentals were whizzing out to new homes.
June? A rising. Yes, still 3925 units short of the June 2019 count, but private sales were up, by 6.2 per cent, and decreases in car and commercial volumes were not as great as in previous months. The total market, excluding rental, was off by 9.5 per cent. Not bad, considering.
More gains in July. The market was down 24.7 per cent year to date, but in July-versus-July 2019, a 3.3 per cent gain, mainly through passenger interest (8176 sold) though ute action reignited (3068). More popular brands enjoyed increased business than not.
August private sales were up 8.3 per cent, rising to 12 per cent in September; the market decline, excluding rentals, was just 8.1 per cent over August of 2019, but 10,902 new vehicles were registered. This continued in October, when private sales comprised 43 per cent of the market, an almost 37 per cent increase in volume over the same month of 2019, with particular action in the luxury sector.
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Toyota has seen high demand for the RAV4 among private buyers.
By then it was clear this rush was accelerating a factor that hangs over most makes now; diminished stock availability.
The MIA was cautious about going into detail, but signalled in September that the national new passenger inventory then was just over 11,000 units – the lowest in at least eight years and half the tally held in April. The commercial stockpile had quartered, to under 5000 vehicles. Hence why waiting lists are forming. There’s widespread expectation a combination of market forces and temporary vehicle supply constraints will continue.
Parts supply is also being severely affected by the pandemic. Air freight has now become too expensive. Sea freight is limited, too, and has much longer timeframes.
The flow-on from the drop in new car availability is also being felt in the used car sector; fewer trade-ins means less late-model stock.
While companies and Government are still buying cars, full recovery relies on the borders re-opening and tourism resuming. At the end of October, rental business was down 83 per cent, or 11,642 units.
Many brands feature in rental fleets, but none more prominently than Toyota. Though it enacted a plan 18 months ago to wean off that reliance, going completely cold turkey in the space of a single week in March hurt. TNZ lost 25 per cent of its 2020 predicted volume; $500-$600 million in lost revenue.
Even so, TNZ has also felt the love of the private buyers it has been seeking to re-engage with. On November 1, the market leader was holding 4000 orders, an unprecedented bank for the first of any month.
