The ups and downs of new car sales

Making money, retaining staff and simply selling vehicles is keeping the new-car industry on its toes as the New Zealand dollar keeps slipping. ALASTAIR SLOANE reports.

The new-car industry is trying its best to pretend the Labour-Alliance Government doesn't exist.

It is trying to stay upbeat as business confidence slides, the dollar goes through a 15-year low against the Greenback and foreign investors shoot through like a Bondi tram.

It will deal with what it sees as nuisance changes to ACC and employment contracts when it has to. Meantime, it is trying to survive - to sell cars, make money and keep staff.

New-car companies are telling their head offices overseas not to pass on any factory increases because the risk of compounded price rises over the next few months is likely if the dollar further devalues.

"A lot of price increases are due to flow through from previous slides in the New Zealand dollar and this latest one will add to the burden," Toyota New Zealand managing director Bob Field told industry newsletter autofile.

"Previously, the Kiwi dollar's decline against the yen mainly affected used imports, but now it's universal and those price pressures will be almost immediate because stock is imported direct and most of us try to keep stock to a minimum."

Steve Downes, the executive director of the Motor Vehicle Dealers' Institute, said car prices had fallen considerably over the past few years but the market would be even more competitive with prices going up in a devalued economy.

"The falling dollar will certainly have an effect. Sales of new vehicles so far this year are up about 8 per cent over last year, but it's hard to say what's going to happen to numbers down the track," he said.

"If confidence in the economy continues to slide, people will ultimately be asking themselves if they can afford a new car.

"But the upside is that later model used imports from Japan will become even more expensive and the new-car industry in New Zealand will be better able to compete.

"New-car dealers are getting a foothold already by targeting people who have been mostly driving late model used imports."

Honda New Zealand knows all about targeting used imports. It has reduced its prices over the past few years to challenge the used market.

For example, in 1995 a new 2.2-litre Odyssey cost a painful $65,000. Used importers picked up near-new models in Japan and undercut Honda by $15,000 and more.

Honda dropped the price to $60,000 and in November 1998 to $45,000. Used Odysseys began to dry up. Now the latest four-cylinder Odyssey is $42,000 and Honda can't get enough.

The carmaker has done the same with its four-cylinder Prelude, a popular used import. Two years ago, a VTi-R automatic Prelude cost $43,000. Today it costs $38,500, down $4500.

The new price is part of a 10 per cent drop in prices on all Honda models except the 2.2 and 3.0-litre Odyssey, the Civic GLi sedan and S2000 sportscar.

Honda, eager to return to the sales success it enjoyed in the mid-1990s, says its new pricing is consistent with the "normal price actually paid for each model by most customers after the industry practice of special offers, demonstrator sales and fleet discounts."

Managing director Sho Minekawa said that having a large discrepancy between the recommended retail price and the average actual selling price for the same car is misleading.

"We are confident our customers will judge our new retail prices as fair and reasonable," he said.