Market For New Cars Shrinks

Sydney Morning Herald

Saturday August 9, 2008

Richard Blackburn

THE bubble has burst. After a strong first half of the year, the new car market slowed last month as higher fuel prices, economic uncertainty and the proposed increase in the luxury car tax took their toll.

Sales were down 2.7 per cent on the same month last year, with most brands recording a drop in showroom traffic.

Until now, the car market has proved resilient in the face of higher interest rates and fuel prices, with year-to-date sales running at all-time record levels - up 2.6 per cent over the same period last year.

But the proposed luxury car tax rise seems to have been the catalyst for an overall downturn in consumer demand.

The Federal Chamber of Automotive Industries claims uncertainty surrounding the tax has had a dramatic effect, with luxury car sales falling by 33 per cent last month, compared with the previous month. Plenty of luxury car buyers brought forward their purchases in June to avoid the 8 per cent tax increase, which will be retrospectively applied from July 1 if it is passed by the Senate later this month.

Andrew McKellar, chief executive of the chamber, says the proposed tax has had a devastating impact on new car sales.

"If this situation continues, the government will not receive the additional revenue it had projected and there is a real risk that it will cost jobs," he says.

But the luxury car tax is not the only reason for the downturn, with Holden, Mitsubishi and Hyundai all recording sales falls. Petrol prices can't be blamed too much either: the only two segments to record meaningful sales increases were medium and large four-wheel-drives, which were up 8.1 per cent and 7.4 per cent respectively.

Private passenger car sales fell 13 per cent, private four-wheel-drive sales were down 21.6 per cent and ute and van sales to private buyers slumped by 14 per cent in June.

Concerns about global warming don't appear to have reached the corridors of power just yet, with government purchases of 4WDs up almost 35 per cent in July and 20 per cent year-to-date.

Toyota remained top of the sales charts, with almost a quarter of the market. This year Toyota has sold 147,961 vehicles, compared with 78,271 for Holden and 63,933 for Ford.

Lexus and BMW were the biggest luxury brand losers. Mercedes and Audi recorded solid sales increases. At the very top end, Bentley, Porsche and Aston Martin appear to be most affected by the luxury car tax.

© 2008 Sydney Morning Herald

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