New car sales will recover: Toyota

Toyota expects the new-vehicle market in New Zealand to quickly bounce back from the recession and is predicting a 5 to 7 per cent hike in sales this year.

That's around 5000 more vehicles than last year's 70,000, or sales of an extra 100 units a week.

The carmaker also banks on a return to upwards of 100,000 sales a year by 2013-15.

Toyota NZ chief executive Alistair Davis says it is unlikely that the "consequence of massive debt levels and the escalating costs of vehicle ownership will cause our car density to fall".

"On balance we consider this unlikely," he said.

"Kiwis just love their cars - they will find ways of keeping them going."

The recession hit the motoring industry hard: new vehicles sales last year were down 32 per cent on 2008, or around 500 sales a week. Between 15 and 20 per cent of dealerships went out of business. Used imports slumped 46 per cent.

Now what? Will the market climb back gradually as happened in the decade following 1997, will it bounce back quickly as in the early 1980s or will it languish as it did for most of the 1990s?

There are many variables, says Davis. "One has to assume population growth will help support vehicle sales, whether by natural growth or from immigration. But that is just a few per cent per year.

"What should also help new vehicle sales is the increasing recognition New Zealand needs to keep up with international trends on emissions, safety and so on.

"Rising fuel prices and higher standards in warrants of fitness will continue to force older vehicles off the roads.

"Increasing compliance requirements could limit the number of used imports entering New Zealand, which would shift the supply mix towards new vehicles, as has already happened in the past two years."

New Zealand has a population of 4.35 million and a car park of 2.8 million vehicles, or 643 cars for every 1000 people.

The average age of the fleet is 12.5 years. It is a car park "completely unbalanced", says Davis.

"Due to the glut of used imports in the mid-2000s and the distorting effect of the frontal impact rule which effectively boosted sales of 1996 vehicles, we have one of the strangest shaped vehicle fleet profiles in the world," he says.

"The most common car on our roads is a 1996 Toyota and at 14 years of age it is probably within six years of the end of its life.

"That means we are going to have a sudden shortage of vehicles over the next decade."

About 7 per cent of the fleet, or around 170,000 vehicles, are scrapped each year. Annual sales growth of 5 per cent in new and used imports, says Davis, will not be enough to keep up with the scrappage.

"The volume of additional registrations has to climb significantly," he says. "The alternative is we let the cars per thousand people fall significantly and that seems unlikely.

"The outlook for total market growth is very positive, even without taking account of the population growth and any modernising of the fleet to lower fuel costs or meet Kyoto obligations."