Aug 18 2020
The outbreak of COVID-19 has weighed heavily on motor vehicle sales across Australia and New Zealand in 2020. Over the year through July, Australian new car sales have fallen almost 20% relative to the prior year. New Zealand’s new vehicles sales have fared similarly over the period, down 25% over the same period.
‘While July saw an uptick in demand for new vehicles in both countries, with sales supported by relaxed lockdown restrictions, July still marked the 28th consecutive month of year-on-year declines for Australian new vehicle sales’, said IBISWorld Senior Industry Analyst, James Thomson.
Although vehicle dealers are likely to benefit from some pent-up demand as activity picks up following the lockdowns, revenue for the Motor Vehicle Dealers industry in Australia is anticipated to decline by 4.4% in 2020-21.
‘COVD-19 has created a tough operating environment for motor vehicle dealers. Traffic volumes are down and with weak consumer sentiment and rising unemployment, consumers have postponed vehicle purchases,’ said Mr Thomson.
Electrified vehicle demand surging amid COVID-19
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, with electric vehicles and plug-in hybrid electric vehicles accounting for just 0.6% of sales last year, the introduction of new electrified models has supported increased sales over the year. Petrol-hybrid vehicles have been a key growth driver in Australia, particularly the introduction of the hybrid Toyota RAV4.
‘The RAV4 was Australia’s highest selling vehicle in July, with hybrid models accounting for more than half of RAV4 sales over the year so far. This saw the sale of electrified vehicles in Australia rise by 104.5% in July 2020, compared with July 2019,’ said Mr Thomson.
The uptake of electrified vehicles in New Zealand has far outpaced Australia, with the size of New Zealand’s electrified vehicle fleet growing strongly over the past five years. In 2016, the New Zealand Government introduced a national Electric Vehicles Programme, which set a target of having 64,000 electric or plug-in hybrid vehicles on New Zealand roads by the end of 2021. However, despite this strong growth, New Zealand looks set to underachieve on its target, with the size of the country’s electric vehicle fleet only surpassing 20,000 vehicles in early 2020. By comparison, Australia does not have a formalised national target for electric vehicle ownership.
Australian uptake of electric vehicles lagging behind
While consumer demand is growing for electric vehicles, internal combustion engine (ICE) vehicles still dominate new car sales. In the absence of greater incentives, the uptake of electric vehicles in Australia is likely to continue to be slow. Low global oil prices are also expected to constrain electric vehicle sales, with running costs for ICE vehicles falling. The COVID-19 pandemic has weighed heavily on global energy demand, leading to oil prices falling sharply in 2020.
‘Given the small size of the domestic vehicle markets for both Australia and New Zealand, both countries are likely to follow the global lead, with electrified sales growing as infrastructure is improved and as more models become available,’ said Mr Thomson.
Supply chain opportunities for battery producers
Increased adoption of electrified vehicles globally has boosted demand for battery materials, including lithium, nickel and cobalt, benefitting operators in the Salt, Lithium and Other Mineral Mining industry. According to the Office of the Chief Economist, electric vehicle sales globally are anticipated to rise from 2.0 million in 2019 to 28.0 million by 2030. Australia is set to benefit as a key part of the global electric vehicle supply chain. With Australia home to roughly 30% of global lithium resources, increased adoption of electrified vehicles is expected to support Australia’s resource sector. In 2019-20, Australia’s lithium exports reached $1.0 billion.
‘While lithium exports are projected to be lower over the next two years, due to subdued pricing, Australia is set to play an important role in the electric vehicle supply chain going forward,’ said Mr Thomson.
Electric vehicles and carbon emission targets
Increased adoption of electrified vehicles should support both Australia and New Zealand’s efforts to meet their 2030 Paris Agreement emissions targets, with the transport sector accounting for approximately 19% of both countries’ emissions. In the short-term, given the modest uptake of electrified vehicles, the impact on the electricity grid is anticipated to be minimal. However, as adoption accelerates, increased pressure on the grid will be likely from 2025 onwards. Motor vehicle dealers should benefit over the coming years as more electric vehicle models come to market at a lower price point and manufacturers are able to prove their reliability.
‘Consumers want reliability and affordability and until electric vehicles can effectively compete on those two points, the environmental impact is likely to play a smaller role in consumers purchasing decisions,’ concluded Mr Thomson.
IBISWorld reports used to develop this release:
- Motor Vehicle Dealers in Australia
- Motor Vehicle Retailing in New Zealand
- Salt, Lithium and Other Mineral Mining in Australia
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647