April sales estimates, from industry sources and amassed during March as buyers stayed at home, suggest the average dealer is surviving on only one quarter of new-car revenue compared with the previous month.
The figures were not reflected in the 17.9 per cent March VFACTS report because of forward orders. The full effect of the current sales decline should be reflected in April data.
Australian Automotive Dealer Association (AADA) CEO James Voortman said many dealers were fulfilling orders in March that were placed in the previous month or earlier.
“The full effect of the current sales decline will be reflected in April data,” he said.
“Dealers are reporting that consumer enquiry levels have dropped dramatically over the last three weeks while important fleet orders from rental car and tourism operators have dried up.”
The Federal Chamber of Automotive Industries (FCAI) said it was not able to comment on actual numbers before the release of the VFACTS data, but concurred it was a difficult time for many sectors, including automotive.
“At this point the industry is largely operating on a ‘business as usual’ basis, still with reasonably consistent supply of both vehicles and parts,” an FCAI spokesperson said.
“Brands are keen to support their customers, particularly from a servicing perspective, and to this end dealerships remain open around the country.”
Dealerships are now increasingly relying on income from aftersales and servicing to support the business. Servicing is regarded as essential to maintaining vehicle movement, particularly for delivery businesses and those in health, emergency, security and the supply of food and provisions for households.
The grim sales news linked to the COVID-19 outbreak comes on top of the perfect storm of declining national vehicle sales, constricted finance and insurance legislation, additional sales tax on ‘luxury’ vehicles in Victoria and Queensland, the closure of Holden activities and a reduction in Honda dealerships.
The ACT was the only state or territory to record a sales increase last month, with 2959 registrations reported through VFACTS – up 77 per cent on March last year.
This was buoyed by replacement vehicles for the massive hailstorm that damaged 30,000 vehicles in parts of the territory on January 20.
Toyota topped the charts in the ACT with 410 sales, followed by Mazda with 383. Many dealers said it was their record month.
However, the spike was only short-lived. One Canberra dealer publicly said he had seen one customer in his showroom in four days.
Meanwhile, hail-damaged vehicles remain in Canberra awaiting insurance companies to move to auctions to clear the stock. It has been reported that the sale of these damaged vehicles may take up to nine months.
Martin Ward, the CEO of AP Eagers, Australia’s biggest dealer group, told GoAutoNews Premium: “The sales of new vehicles are now well below 50 per cent based on order intake. There are still a few April deliveries of cars sold in January, February and March.
“The drop in March was officially 18 per cent but during March Holden was up 30 per cent and the ACT was up because of their hailstorm replacement. So with Canberra up and General Motors up 30 per cent in March and the total down 18 per cent, March sales would clearly have been down more if it had not been for those two events.
“Clearly it will be lower again in April but that still will not include the true picture because the numbers I am looking at are for order intake and there are still some deliveries taking place from previously committed customers.”
Mr Ward said there have also been some cancellations of orders.
He added that service sales are beginning to decline more quickly than in March.
“Service held up until the end of March. It is now declining quite rapidly but not as fast as new cars. A number of my sites are below 50 per cent service already,” Mr Ward said.
Aside from the temporary sales increase in the ACT, Western Australia in March was the least affected in the country as ongoing mining employment buoyed confidence (7288, – 14.4%).
There is also more work for WA fly-in fly-out workers after interstate workers were prevented from travelling into the state, while rosters have changed to two weeks on and two weeks off from a previous one-week cycle.
The virus has reduced the number of people allowed in corporate vehicles. In the mining community, this has led to more buses, trucks and utes being rented or purchased and spun off a brisk trade in equipping these new vehicles with specialist mining equipment, directly benefiting WA’s aftermarket industry.
Buses were the only commercial vehicles in WA – and nationally – to lift sales in March with a 14.3 per cent and 29.6 per cent respective boost in sales for 20-plus seaters.
While that’s good news for WA, the longer view is that in the past six years, vehicle sales for the state are down about 25 per cent compared with the national fall of about two per cent.
Finance companies are moving to manual release which allows dealers to take more control over their stock levels, said one industry representative.
This controls the flow of the stock that can be sent from the OEM to the dealership and acts as a buffer to the flow of imported vehicles streaming into dealerships.
The early move to manual release is a response to a situation in Australia in 2009 during the global financial crisis when large volumes of stock kept arriving and had to be warehoused by dealers awaiting buyers.
Many car-makers have stopped production. Japan has reduced the daily build rate but there are still ships in transit with stock for Australia.
Some dealerships have closed but the majority have adopted reduced work hours, some dividing the employees into three with each group working two days a week, and others splitting the work into two-week shifts, while some businesses have introduced pay cuts of 20 to 50 per cent or stood down staff.
In some cases, casual and probationary staff have been dismissed. Apprentices are also at risk, despite the federal government providing specific financial aid to keep apprentices employed. Because dealerships have such high revenue flows due to the high prices of the products they sell, they generally do not qualify for the government assistance.
Industry associations such as the Victorian Automobile Chamber of Commerce (VACC) are working hard to point out to the government that revenue limits applied to the assistance for apprentices unfairly impact the motor trade.
The fear expressed by industry spokespeople and the VACC is that apprentices who have been dismissed may never return to the automotive industry, creating future shortfall problems.
The FCAI said many brands had implemented innovative programs allowing customers and dealers to communicate via video or teleconferences.
“This contactless process can be extended to the service department, so customers can have important servicing and maintenance issues attended to in safe conditions,” the chamber said.
“In addition, many dealerships have implemented extra hygiene protocols for delivering vehicles which can include the application of extra cleaning and disinfectants.”
By Neil Dowling