Australia Autos Report Q3 2009

While new vehicle sales in Australia were down by over 20% for 4M09, there are signs that the government's stimulus plan and tax rebates are beginning to take effect. Sales for April were up marginally on March in seasonally adjusted terms, rising by 1.7%. The potential for increased demand has prompted Federal Chamber of Automotive Industries (FCAI) CEO, Andrew McKellar, to suggest that passing legislation for tax breaks sooner rather than later should boost new car sales. The current pace is slightly below the forecast for a 13% decline by year-end to 855,562 units. However, the passing of legislation for tax breaks on car purchases would provide a sufficient boost to meet this projection. We maintain our view that sales will begin to pick up from 2010 with annual growth of around 5%.

Meanwhile, government incentives for 'green' cars continue to encourage investment from carmakers. Ford Australia has taken a step towards significantly improving the fuel-efficiency of its vehicles with the opening of its Advanced Centre for Automotive Research and Testing (ACART). Built in conjunction with the Victorian state government and Melbourne University, the US$20mn centre will feature what is claimed to be the most powerful wind tunnel in the Asia Pacific region as well as an environmental testing lab, an engine dynamometer unit, and multi-fuel emission test cells. Ford will allow the centre to contribute to its business commercially by opening up the facility to other carmakers and suppliers, which should help to support the long-term development of the industry as a whole.

Such government support is an important factor in attracting investment to Australia, which ranks second to China in the Business Environment Ratings for the Asia Pacific autos industry with a score of 65.3 out of a possible 100. The developed nature of the country means that it is at a disadvantage due to the near-saturation of its market, which reduces growth potential. On the other hand, a high GDP increases purchasing power, while market risks are reduced by low levels of corruption and a strong legal framework. This is reflected in the market's high score for its Risk to Realisation of Returns.

Although those who have invested in local operations still have the advantage in terms of market share, the economic slowdown is creating opportunities for other brands. According to Hyundai spokesperson, Ben Hershman, 'value becomes important' in times of financial uncertainty. This, along with a strong portfolio of new products such as the i30, the iLoad, and the iMax, contributed to company growth of 12.3% in April. While staying in second and third place, GM Holden and Ford saw sales drop by 23% and 17%, respectively. Toyota Motor held on to the overall lead with sales of 13,033 units.