Aug 19 2020
The outbreak of COVID-19 has weighed heavily on motor vehicle sales across Australia. Over the year through July 2020, Australian new car sales have fallen almost 20% relative to the prior year. While sales recovered slightly in July, the month marked the 28th consecutive month of year-on-year declines for Australian new vehicle sales. As a result, operators in the Motor Vehicle Wholesaling industry struggled in 2019-20, with revenue falling 23.1% for the year. Although wholesalers and dealers are likely to benefit from some pent-up demand as activity picks up following the COVID-19 lockdowns, the short-term outlook for vehicle sales remains challenging. Despite the tough market in Australia, sales of electrified vehicles have performed comparatively well, accounting for a larger share of vehicle sales.
Revenue for the Motor Vehicle Dealers industry is expected to fall a further 4.3% in 2020-21. The economic fallout from the COVD-19 pandemic is anticipated to continue creating a tough operating environment for motor vehicle dealers and wholesalers for several reasons:
- The increased uptake of remote working arrangements has reduced the need for many workers to use their vehicles.
- Weak consumer sentiment is projected to persist over the year.
- The national unemployment rate is expected to rise, leading to income falls for consumers.
As a result, many consumers are anticipated to postpone large purchases, constraining motor vehicle sales.
Electric vehicle demand rising amid the COVID-19 pandemic
Despite motor vehicle sales declining over the year, sales of electrified vehicles have fared better, rising as a share of new vehicle sales in Australia. Although the uptake of electrified vehicles in Australia has been slow, the introduction of new electrified models has supported demand over the year. Sales of petrol-hybrid vehicles have also benefited from the introduction of new models in Australia, such as the hybrid Toyota RAV4. The RAV4 was Australia’s highest selling vehicle in July 2020, with hybrid models accounting for more than half of RAV4 sales over the year so far.
Australian uptake of electric vehicles lagging behind
While consumer demand is growing for electric vehicles in Australia, internal combustion engine (ICE) vehicles still dominate new car sales. Australian sales lag behind most developed countries, with electric vehicles sold only accounting for 0.6% of sales in 2019. Electric vehicles typically account for between 2.5% and 5.0% of new vehicle sales in developed countries, according to the Electric Vehicle Council. Australia lacks a formalised national target for electric vehicle adoption. In the absence of greater incentives, the uptake of electric vehicles in Australia is likely to continue to be slow. However, as consumer acceptance of electrified vehicles grows, increased adoption is anticipated to support Australia’s efforts to meet its 2030 Paris Agreement emissions targets. The transport sector currently accounts for approximately 19% of the country’s emissions. Motor vehicle dealers should benefit from rising public concern over environmental issues over the coming years, with more electric vehicle models coming to market at a lower price point providing an avenue of growth for motor vehicle dealers and wholesalers.
IBISWorld reports mentioned in this release: