FEDERAL Chamber of Automotive Industries (FCAI) chief executive Tony Weber is confident continued low interest rates and the intense competition in the Australian new-vehicle market will ensure sales reach a record mark of close to 1.2 million units this year – and continue at this running rate for the foreseeable future.

As VFACTS figures released this week show, total industry sales of 784,380 units to the end of August represent an increase of 22,940 units – or 3.0 per cent – over the same period last year, which went on to become a record annual result of 1,155,408 units come December 31.

Speaking to GoAuto on the sidelines of the Australian Automotive Dealer Association’s convention in Melbourne this week, Mr Weber, who is head of the peak industry body representing motor vehicle manufacturers and importers, said the market would remain on record pace for the remainder of the year, barring an unforeseen “external catastrophe” like the global financial crisis.

“The market’s up three per cent – and it’s been strong all year. We’ve had a number of record months – last month was another record – I think it’s well placed,” he said.

“The fact that there’s so much competition in the market, interest rates are low, it’s a ‘perfect storm’ for the industry and a perfect position for consumers to buy cars, and they’re just exercising their option.

“We’ve got four months to go and I’m pretty strong (in the belief) that it will be a record year. Interest rates aren’t going to go up this year, that’s for sure, the competition is not going to diminish, so unless there’s some external catastrophe – you know, another GFC – it’s going to be a record year.”

Mr Weber also said there were no headwinds apparent further afield, predicting that if “those two ingredients remain in place – low interest rates and competition – we will continue to see sales strong.”

He also emphasised that while a healthy economy was a major factor, it was competition among the motor vehicle brands driving the marketplace to new heights.

“There is so much product out there – there are over 400 models in the market – so much competition keeping prices low,” he said.

In a presentation at the AADA convention this week, Deloitte Motor Industry Services lead client director Stephen Timperley highlighted the increasingly competitive nature of the Australian car industry.

“Sixty-eight brands from 26 countries with over 490 models available … and the lowest interest rate we’ve ever seen before. That leads to the most competitive market in the world,” he said.

Last year’s record result was up 3.8 per cent on the previous year and eclipsed 2013’s record 1,136,227 units by 1.7 per cent. More than a million units have been sold in eight out of the past nine years, with the GFC-hit 2009 the only blip on the chart.

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Mr Weber cited vehicle affordability as another key reason behind the ongoing growth, pointing to a variety of sources such as CommSec’s Car Affordability Index (running since 1976) and recent investigative reports in the UK and Australia, including one conducted by GoAuto.

“In real terms, cars are getting cheaper and cheaper, and in nominal terms even getting cheaper. Consumers are just saying: ‘This is a great option.’

“Affordability is the lowest since CommSec have actually been keeping records, so that says a lot,” he said.

The economic outlook is also positive, with the Reserve Bank this week leaving the cash rate at a record low of 1.5 per cent and with figures released which show Australia’s economy grew by 3.3 per cent over the year to June – the best annual GDP growth in four years.

CommSec chief economist Craig James said: “There are no signs that Australia’s record economic expansion is coming to an end. Far from it – annual growth has lifted to four-year highs.

“Australia has now notched up 100 quarters without a recession. Netherlands holds the record for the longest expansion at 103 quarters. Over the next year Australia should pick up the gold medal for the longest economic expansion of a developed economy in the modern era.

“Could we be doing even better? There is always room for improvement. For instance, we could have even lower unemployment but still keeping inflationary pressures contained. The challenge for the authorities is to keep the expansion intact.

“The Reserve Bank could still cut rates – that is, if inflation remains low, rates could be cut to allow the economy to grow even faster. We continue to pencil in a rate cut in November. The question though is whether rates are already low enough to boost growth.”

The car industry’s sales growth this year can be seen on a variety of fronts. All states and territories are up with the exception of Tasmania and Western Australia (-2.3 and -3.7 per cent respectively), while New South Wales, which is the single biggest market by a long shot (264,702 units YTD), has grown 6.0 per cent.

Not including heavy commercial vehicles, which are up 2.4 per cent year to date, business sales have climbed an impressive 16.0 per cent this year and rental sales have likewise experienced double-digit growth, up 12.9 per cent.

Sales to government fleets are tracking along similar lines to last year – down 1.5 per cent to the end of August – while privately owned vehicle purchases are down 5.9 per cent.

Demand for SUVs and light-commercial vehicles continues to drive the market this year, with these segments up 10.3 and 10.4 per cent respectively. In contrast, passenger car sales are down 5.5 per cent.

By Terry Martin