The used and new car markets are heading in a different direction reports motoring editor Alastair Sloane
KEY POINTS:
Once, a used car dealer bought from the average Joe, who didn't know what the wholesale price of the car was and sold to another average Joe, who didn't know what the retail price was. The difference was money in the bank.
Not any more. Websites like TradeMe have changed the rules. "Scroll through TradeMe for an hour or so and you quickly find what your car's worth," says an industry executive.
"Suddenly, after many years, there's not as much good money to be made in used cars so there's fewer people in the business."
The used and new car market in New Zealand is changing forever. Car fairs and the internet prompted the change. Higher fuel costs and emissions and safety regulations have forced further changes.
Sales of big cars and sports utility vehicles are down across the board and small cars are up. Used imports numbers are down. Sites like TradeMe have eroded traditional dealer business.
Figures show used vehicle dealers are losing out to private sales. What the industry calls "dealer to public sales" are down 10 per cent so far this year, seven per cent more than last year.
Used imports are down 17 per cent on 2007. June used imports alone were down 24 per cent, the worst June in 13 years. Registrations of used imports is down 13 per cent so far this year.
"In the old days," says an industry observer, "people would go to a used car dealer to buy a used car, because there was some question mark about its reliability.
"Today, you buy a car from a car fair and if it's Japanese you know its going to be okay. The fact is, even if it's not okay you'll go and buy another one. Used cars have become a commodity.
"The landscape has been changing for some time - the dealer business is now very tough, especially for used importers.
"I'm hearing stories that used importers have 10 months worth of stock where, in a good market, they would have two months."
The fall-off in used imports has been looming for some time. Supply and demand is changing in Japan. The domestic market has been falling and the Japanese are holding on to their cars longer. At the same time there are more countries picking up used imports from Japan, which is affecting New Zealand dealers' ability to buy them. This is not new, but it is has picked up momentum over the past three years.
Says one industry executive who didn't wanted to be named: "Add in the general economic scene which is affecting new and used business, - interest rates, customer confidence, fuel price, disposable incomes - and the drift towards smaller cars and you have a perfect storm of factors which are clobbering used imports."
Motor Industry Association CEO Perry Kerr says the used segment gets hit the "earliest and hardest" in tough economic times.
"On top of that you've had the finance house collapses and certainly the early casualties were the lenders of last resort to the motor vehicle area," he said.
"Probably this is the first time that the used import car industry - certainly in the past seven or eight years - has suffered a downturn.
"The market goes up and down - it always has and always will. The car market here is a used-car market - there are 10 used car transactions for every new car.
"We've come off a long period where the market has been growing and some of these guys don't understand the economics of the country.
"You have always had dealers close in downturns, because fundamentally they've just been sitting there making a buck and when it all gets too hard they walk away."
The upcoming changes to emissions regulations will mean further changes. A decade ago, most used imports were around five to seven years old. As the market got tougher in Japan, used imports got older, around the nine to 12-year bracket.
Emissions laws will shut out that age group. Nissan NZ marketing manager Peter Merrie says legislative and economic influences will inevitably re-shape the market.
"Whether the landscape changes permanently, I don't know. There are more NZ-new models out there and people are getting tuned into campaigns on side airbags and stability systems.
"Those safety systems are going to take a long time to filter through on used imports, whereas NZ-new will filter through quicker. Those sort of legislative things will have an effect. The push will be to get a lot of that technology into the market and to exclude the old used imports.
"I guess there will still be a market for the larger used importers. They will still operate as much as they can in the used market. But you may well see newer models coming in."
Kerr says parts of the lure of imports in the early days was equipment levels - used imports had electric windows while NZ-new cars had wind-ups.
"Now it's more critical," he says. "The new-vehicle industry has come of age. The product being offered is world-leading. NZ-new cars have the best safety features - 68 per cent have electronic stability control. Each new model is more fuel-efficient that the one its replacing.
"The industry is in the best position it has ever been. I regretted the closure of vehicle assembly industry at the time (1999) but looking back it is the best decision a government of the day has ever made for the new-vehicle industry."
