Boom market not yet set to bust

It’s the gift that keeps on giving … the new vehicle market keeps hitting up record monthly counts. Will this bonanza ever end?


INDUSTRY expectation of the new vehicle market running almost 10 percent ahead of last year’s blockbuster count is already being undermined – because monthly data to date shows an even greater lift.

That comment comes from Motor Industry Association (MIA) president Glynn Tulloch, in the wake of release of a May registrations count that indicates a 14 percent increase over the same year-to-date period of 2016.

Tulloch, who as group general manager of the Giltrap Group’s European Motor Distributors operation heads the country’s biggest independent importer of new vehicles and marques, admits the MIA – which represents all new distributors – has, despite intensive effort to forecast correctly, continually been caught out by the growth.

“We’ve undercalled the market for the last five years and you do wonder where it is going to end though, when you look at things like immigration statistics and the economic forecast, you cannot see and end … at least not in the next few months for the very least.”

The condition now is one he has never previously experienced during 27 years in the car industry, he admits. There is a clear consistency with the upward movement – insofar, for instance, that one-tonne utes keep on dominating and Toyota New Zealand comfortably maintains its No.1 status -  and yet, for all that, the rate of change within specific sectors is keeping the industry on its toes.

The best example is the sports utility sector: Accounting for 48.1 percent of the passenger market in 2015 and 51.8 percent last year, the year-to-date average is 59 percent – an apparent world-leading achievement, yet unlikely to be a peak.

“The SUV figure for May was 62 percent …. (and) it’s not over because now there is increasing interest in small SUVs that is being met with a whole raft of new models – the (Toyota) C-HR, the (Honda) HRV and (Mazda) CX-3 are just the start. There are more to come to the market.

“We see the SUV trend continuing and I reckon it will, if anything, keep accelerating.”

With that kind of trend occurring even before next week’s Fieldays, which traditionally behaves as the high point of new vehicle sales activity with an impact that tends to endure for months, it could be that the MIA’s forecast of 109,000 new car and 46,500 light commercial (van and utility) registrations might prove too modest.

What interests Tulloch, also, is that while some model types have grown in popularity and others waned, none the latter are at the point of unpopularity where they would be at risk of being dropped from sale.

Accordingly, even though large-sized sedans and people-carriers are very much niche fare, he doesn’t expect them to face extinction any time soon.

“It’s right that, as one category grows, another might decline, but in outright terms it has been a minor decline.

“Even in some of the segments that outwardly are looking unfashionable – like the sedan categories – there has been some decline, but it’s relatively minor.

“So will we see one of those segments dying out? I would think the answer is ‘probably not’. Some of those segments could get quite small, yet there might always be a market for three-box sedans, traditional wagons and other such things, even if the demand reduces even more than it has.”

Even though the good times keep rolling, and there are no obvious signs of change to that, the industry is nonetheless not leaving itself under-prepared for a turning of the tide, he says.

“I don’t think the industry has seen a period of such prolonged growth since the Great Recession of 2008-2009, we’ve never seen it keep going the way it has.

“But, absolutely, you have to prepare for change. But I don’t know if we are going to see sudden change. Constant growth cannot go on forever … there will be a point at which the market is not growing.”

Even though fewer brands seem to be discounting at the moment to keep registrations gee-ed up, Tulloch says the competitiveness among distributors and brands is such that they will still fight hard to win extra market share or hit targets.

“There is not as much discounting because I don’t think there is the same pressure there to clear stock that there has been.

“However there is still competitor pressure there because people still want to win, they might have guaranteed a manufacturer certain volumes … so there’s still potentially more discount pressure there than there needs to be.”

Even though the industry signalled last month that consumer demand for some product was running ahead of supply, Tulloch doubts that will remain an ongoing issue, simply because many manufacturers have more than enough production capability.

“I would think that would only be a short-term event. All of the manufacturers could easily swamp this market with additional product if the importer or distributor said that they wanted it.”

In respect to last month, some 13,132 new vehicles were registered, taking the year to date total to 63,244 units, against 55,435 vehicles for the same period of 2016.

Passenger car and SUV registrations hit 8,387 units, up 885 units or 11.8 percent over May 2016. The MIA says May 2017 was the strongest month ever since it began collecting data in 1975.

Toyota remains the overall market leader with 18 percent share (2370 units) followed by Ford with 11 percent (1495 units) and Mazda, Holden and Mitsubishi all with eight percent (1072,1029 and 1028 units respectively.

Toyota also maintains dominance of the passenger and SUV area, with 15 percent share (1245 units) followed by Mazda (886 units for 11 percent) then Holden (eight percent, 681 units).

In respect to specific models, the Toyota RAV4 is the most successful passenger car, moving 391 units – mainly to rental fleet operators - followed by the Mazda CX-5 (330 units) and the Kia Sportage (302 units); the latter mostly to private buyers.

The commercial sector achieved even more action. May was the strongest month on record, in addition to being the strongest overall month since data collection began.

Toyota was dominant with 24 percent share (1125 units), followed by Ford at 20 percent (971 units) then Mitsubishi, though with just 11 percent and 501 units.

The best-selling model for the month remains the Ford Ranger, selling 889 units, but closely followed by Toyota's Hilux with 819 units. The Mitsubishi Triton was third with 501 units. 

For the month of May, four of the top five vehicle segments were dominated by SUV’s and Utes (Pick Up/Chassis Cab), the SUV medium segment being the most dominant with 18% share (2,305 units) followed by Pick Up/Chassis Cab 4x4 with 16% (2,112 units), then SUV large with 12% (1,568 units), then Pick Up/Chassis Cab 4x2 on 10% (1,347 units), and the 5th being passenger small with 9% and 1,244 units.

“Low interest rates, strong net immigration, strong New Zealand currency and robust domestic economy continue to underpin the sales of new vehicles” said Glynn Tulloch, President of the Motor Industry Association.