New car market saturated and set to decline, Toyota says

It’s been an impressive ascent, but new car sales will peak this year, the dominating brand believes.


NEW passenger and commercial vehicle sales for 2015 will reach an unprecedented 133,000 units – but will go no higher, a spokesman for the market leader has told Motoring Network.

Toyota New Zealand’s general manager of sales believes the market, after a period of “almost unbelievable” resilience, has reached saturation point, but that’s only one factor. A softening economy will also impinge.

“We think it will finish on 133,000, which is a record and potentially at its peak level,” says Steve Prangnell.

And then? It’ll start to decline, potentially by 10,500 registrations; not a calamity by any means least of all for TNZ, which he believes will still maintain the easy dominance it has enjoyed for years.

Likewise, while all market players will feel the pinch, none is likely to be dangerously hurt.

However, Prangnell says enough red flags are flying to suggest the impressive climb in new car sales enjoyed here since 2011 is about to end. A falling exchange rate, faltering dairy prices and weaker GDP growth will push up prices of new vehicles and slow demand.

Prangnell says TNZ strategists have noted a noticeable slowdown in vehicle sales related to the rebuilding of both Christchurch and the national economy post the global financial crisis. But the effect is being masked by an incredibly strong end-of-year demand for rental volume, up 33 percent due to the strength of the tourism sector.

Nonetheless, says Prangnell: “Both Statistics NZ and the NZ Institute of Economic Research predict a slowing economy with growth reducing from three percent to under 2.5 percent.

“While the foreign exchange volatility of recent months seems to have stabilised, of course dairy prices remain depressed after their brief rally, so we expect the (2016) market to drop back, maybe as much as 7-8 percent.”

If TNZ’s prediction of a total market of 122,500 units is correct, where does that leave the industry leader?

Prangnell is picking TNZ will move 25,000 vehicles, a seven percent reduction on this year’s forecast result. He doesn’t expect TNZ’s overall share of sales pie to become any smaller, however.

Prangnell doesn’t disagree that the good times of the past four years have been great. In 2011, the new car market was at 85,000 units. To reach a likely 133,000 units by December 31 would be fantastic. Yet “that’s an increase of 54 percent in five years, which is unheard of and ultimately unsustainable.”

During that time buyers had shifted from passenger hatchbacks and sedans to light trucks and SUVs. Sales of small/medium, medium, and large cars have fallen from 38 percent of the market to 30 percent. Light trucks – which rate as commercial vehicles regardless that a growing count are being used for private, mainly recreational, use - have risen from 15 percent to 21 percent, and sports utilities from 21 to 29 percent.

“To put that into context, if passengers cars had held their share they would’ve sold 50,000 units this year, or 28 percent more than the likely 39,000,” Prangnell said.

“Conversely, light trucks would’ve been 19,700 this year, instead of heading for 27,500, a 39 percent lift in volume. So there’s lots of movement among the lower-ranked marques as they adjust their sales mix and model line-ups to meet the market.”

At time of writing, TNZ was sitting pretty with 22,015 combined Toyota and Lexus passenger sales, for a 19.6 percent of that market, nearly 9500 units up on second-placed Holden, which holds a 11.2 percent share. Third is Ford, the only brand to lose market share, being down two percent. That’s due to a big drop in passenger volume; while Ford has crowed about the success of its Ranger utility, it is not at all vocal about a 14.5 percent decline in passenger volume – a sobering issue when the passenger market as a whole is up 5.4 percent year-on-year. Ford holds a 10.1 percent share of the new vehicle market.

Next are Mazda, the year’s big improver with a 26 percent gain, for 8546 sales and a 7.6 percent share of the new vehicle market, then Mitsubishi and Hyundai, with respective counts of 7453 and 7242 units, which equate to 6.6 and 6.5 percent of the market.