Slowing new car market sees Kiwis squeezing more out of ageing fleet

Friday 16th August 2019

The slowing market for new car sales has weighed on dealers' earnings but has been a boon for the likes of Super Cheap Auto as people try to get more out of their ageing vehicles.

Motor Industry Association data show new car registrations were tracking 5.2 percent lower in the seven months through July from a year earlier and are poised to see the end of a five-year run of record sales.

That malaise hasn’t seeped into the auto parts market, with Super Cheap Auto’s 45 New Zealand stores reporting a 35 percent increase in revenue to A$184.3 million in the year ended June 30. In that period, the auto parts retailer opened just one New Zealand store.

MIA chief executive David Crawford said new vehicle sales haven’t softened as much as he thought they might, and are still tracking around 2016 levels.

That caution around buying new cars has meant people are holding on to their older vehicles, which is underpinning the growth in parts sales. At the same time, there’s been rapid population growth which has meant there are more cars on the roads.

“We’ve got a larger fleet and people are looking and saying ‘I might not buy a new car, I might just invest in keeping this one going’,” Crawford said. “While the new vehicles market is going down, the fleet is so big so it’s driving the market for parts and it’s cheaper than buying a new one.”

Where the slowdown is showing up is among vehicle dealers such as Colonial Motor Co. The listed dealer this week reported an 11 percent decline in trading profit to $22.1 million in the year ended June 30.

“The new vehicle industry slowed to a growth of 1 percent in the first six months of the financial year then declined by 5 percent in the second half,” chair Jim Gibbons said in his report.

Colonial Motor Co, which listed in 1962, still managed to lift revenue 0.5 percent to $909 million, with Gibbons pointing to strong performances from Southpac Trucks heavy trucks dealerships.

However, he said the outlook was still uncertain. Government data show New Zealand's annual retail spending on motor vehicles and parts decreased 1.2 percent to $13.18 billion in the March year on a 0.5 percent dip in the volume of sales.

The more timely electronic card series shows spending on cars and parts rose 3.3 percent in the 12 months through July to $2.13 billion. The figure excludes cash and cheque payments and finance options which are often used to buy cars and may reflect increased demand for parts.

“The range and depth of potential challenges to our industry and the NZ economy, from both offshore and domestically, have increased. The outlook is for continued uncertainty,” Gibbons said.

(BusinessDesk)

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