Five months into the year, Australian car sales are growing at a record pace. If this trend doesn’t slow in the next seven months, total new sales could top 1.3 million, setting a new all-time high.
Yet, despite this bullish market sentiment, the message from the two listed car dealers, Eagers and Peter Warren, is less optimistic. Both issued profit downgrades in May. Eagers forecast a slide of 15% in its half-year (ending June 30) result, while Peter Warren projected a drop of up to 30% in its full-year result for the year ending June.
The companies attributed these downgrades to growing pressure on margins and increased costs associated with selling new vehicles, despite consistent demand. They cited pressures from high interest rates and signs of potential buyers cutting back on discretionary purchases or driving tougher pricing deals.
Both companies announced plans to implement cost-cutting measures, expand their used car sales operations, and enhance after-sales servicing while offering buyers more options.
Both seem to be grappling with the same problem: dwindling earnings despite stable sales and revenues.
May sales figures might offer a clue to these challenges. The data reveals a decline in sales of petrol-powered vehicles, with 45,262 unleaded-fuelled vehicles sold last month out of a total of 111,099, marking a 13.5% decrease from the previous year—the only category to show a decline compared to the previous year.
Conversely, diesel-powered vehicle sales saw a 7.5% increase in May to 34,479 units from a year earlier.
The May sales figures, released on Wednesday, indicate that the new car boom remains intact and has not been hindered by the high interest rate environment. Rather, there has been a shift towards diesel, hybrid, and electric vehicles (EVs).
Data from the Federated Chamber of Automotive Industry (FCAI) shows that the Australian new car market achieved its fifth consecutive record month in May, marking the longest growth streak in two decades. May recorded a 5.1% increase to 111,099 vehicles from May 2023, a significant surge from April’s record sales of 92,202 units. Total sales for the first five months of the year reached 512,753, up a solid 12.2% from the same period in 2023.
Sales were boosted by early end-of-financial-year pricing deals from major dealers, although this alone doesn’t explain the sustained sales growth in the preceding four months.
In May, hybrid sales reached 16,218 units, a 113.4% increase from the same month last year. Plug-in hybrid (PHEV) sales also saw a substantial rise, up 74% from 2023 to 1,373 units for the month. EV sales grew by 10.5% to 8,974 units, primarily led by Tesla and BYD models for EVs and BYD vehicles for plug-ins.
Many of the hybrids sold were Toyota vehicles. Toyota recently announced that it would discontinue importing several petrol-engine models and instead only ship hybrids of those models into the country, covering nine separate models, including the RAV4, Corolla, and Kluger.
However, the popular Yaris Cross will not be shipped to Australia due to a scandal in Japan involving dodgy certification and other testing issues affecting Toyota, Hino Trucks, and Daihatsu cars.
Toyota announced on Tuesday that imports of the Yaris Cross would be suspended indefinitely following a Japanese government investigation revealing testing and other problems. As a result, Toyota has halted production in Japan of the Corolla Fielder, Corolla Axio, and Yaris Cross, leading to the suspension of Yaris Cross imports into Australia.
Toyota assured that the issues do not affect the safety of vehicles already on roads, including the Corolla subcompact and its lucrative Lexus luxury vehicles.
With the popular Yaris Cross unavailable and hybrid-only versions of eight other models, it is unlikely that the car sales boom will continue much longer.