“Even more daunting than the peak of the Global Financial Crisis.”
That’s the message Motor Industry Association (MIA) head Aimee Wiley is getting from some of her members after the fifth straight month of slumping sales.
Wiley expects more dealers to go to the wall.
May new
The only relative bright spots were light commercial vehicles (buoyed to 7.3 per cent year-on-year growth by the elimination of the “ute tax” in the New Year) and increasing sales of non-plug-in hybrid electric vehicles – which are exempt from the road user charges introduced for EVs and Phevs (plug-in hybrids) from this month.
“May saw a relentless dip in new vehicle registrations, perpetuating an ongoing decline. While light commercial sales remained steady and heavy vehicle sales saw an uptick, the light passenger segment continues to be hit hardest by the prevailing economic recession,” the MIA said.
“The distressing trend of falling registrations has persisted for the year’s first five months, underscoring the sector’s struggle.”
At 10,186 new vehicle registrations, May 2024 is 23.7 per cent – or 3168 vehicle sales lower than May 2023 (3168 units) and 23.6 per cent lower than May 2022.
Year-to-date, 2024 is 13.3 per cent lower (or 8198 fewer sales) than 2023 and 23.8 per cent lower (or 16,703) than 2022.
“Recognising that industry consolidation is a pressing concern right now, it’s disheartening to note that several dealerships have already shut down in recent months,” Wiley told the Herald.
They included EuroCity Napier. Earlier this month, it was revealed the dealership – now in liquidation – owed $1.2 million to creditors including IRD ($458,036) staff ($334,296) and various media outlets and sites that carried its listings.
“If the current weak demand persists, as projected by industry experts, government, and key economists for the rest of 2024, more closures are, unfortunately, likely,” Wiley said.
“While we all hope for a revival in the light passenger segment, the Government’s forecast of subdued economic conditions in the near term suggests a challenging Q3 and Q4 ahead for the industry.”
ABOVE: Pandemic lockdowns, the introduction of the Clean Car Discount, tweaks to the scheme in mid-2023 and its axing by the new Government have spurred sudden swings in sales - in a market where dealers have to order six to eight months in advance.
Some second-hand dealers are faring better, however. In an April research note, Forsyth Barr noted reliance in the sector, as interest rates stabilised. In May, Turners reported record earnings.
“The grim reality currently facing the new light passenger industry is more complex than economic recessionary headwinds,” Wiley said.
“It also includes recent policy changes that have simultaneously hit hard. With the removal of the clean car discount at the end of 2023 and the recent introduction of road-user charges on electric vehicles), demand for EVs has plummeted.
“Consumer preferences have shifted away from EVs toward mild [non-plug-in] hybrid and back to traditional petrol ice vehicles. That translates into an entirely new layer of complexity, somewhat difficult to navigate when faced with long product lead times to accommodate supply chain issues, manufacturing and shipping.
Vehicles in stock now would have been ordered between six months and 18 months ago, when market and policy conditions were entirely different, Wiley said.
“The Clean Car Standard is also biting hard right now,” the MIA chief executive added.
The new Government removed the Clean Car Discount rebated to car buyers, it maintained the Clean Car Standard that sees importers incur charges on higher-emission vehicles - which can be offset by credits earned for bringing in lower-emission models.
A complicated formula involving a $100 penalty for each gram CO2 per kilometre over a Government set average fleet target is applied to new vehicles, and half that amount to second-hand imports.
“Getting the product mix offering right is crucial and that includes timing, availability, and an ample supply of Clean Car Standard CO2 credits to offset any penalties triggered by the sudden shift in consumer demand,” Wiley said.
“Such layers of complexity are further dividing the winners and losers. Unfortunately, not everybody can win.
“Aligning demand and supply and remaining commercially viable is increasingly complex. It’s probably tougher right now for the new [vehicle] industry than ever before.”
The Herald put the MIA’s concerns about Clean Car Standard complexity to Transport Minister Simeon Brown.
“I directed officials to begin a comprehensive review of the Clean Car Importer Standard and ensured that the automotive industry was closely engaged throughout this review,” Brown said.
“The Government supports the Clean Car Importer Standard to ensure that New Zealand continues to receive the supply of low and zero emissions vehicles being manufactured globally.”
@7newsmelbourne Thousands of Teslas are piling up at Melbourne ports as sales plummet across the country. The slowdown has motoring experts worried that the honeymoon is over for electric vehicles. 7NEWS at 6pm | Stream on @7plus @bethy.crocker
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However, it is important that the Clean Car Importer Standard strikes the balance between reducing transport emissions and ensuring that New Zealand’s policy settings continue to allow the automotive sector and the wider economy to grow, Brown said.
“The review will determine whether the Clean Car Importer Standard reflects international market standards and ensures the availability, affordability, and mix of vehicles needed in the New Zealand market.”
The Land Transport (Clean Vehicle Standard) Amendment Bill, introduced on May 30, does not amend any of the Clean Car Standard’s targets.
But once passed, the legislation will ensure that any necessary changes to the Standard’s targets can be made following the outcome of the review, Brown said.
While EVs, phevs and hybrids accounted for half the market in several months during 2023, the changing carrot and stick incentive environment saw “ice” (internal combustion engine) vehicles account for 73 per cent of the market in May, followed by non-plug-in, RUC-exempt hybrids (21 per cent), pure EVs (4 per cent) and plug-in hybrids (2 per cent).
The Clean Car Discount boom of 2023 – which saw more than 1000 Teslas sold in some months – is now a distant memory.
Pure EVs
Plug-in hybrids
Non-plugin-hybrids
Utes
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
Mainfreight said its NZ division outperformed an estimate.