Mitsubishi thinks positive

MITSUBISHI Motors Australia Limited president and CEO Robert McEniry believes a return of market confidence is likely within the next six months, following a flat Christmas period, rather than any catastrophic consumer spending freeze.

However, the Mitsubishi chief has warned that local manufacturers and importers alike must be careful not to create forced demand.

Speaking to GoAuto last week in the lead-up to what is almost certain to be a softer-than-expected October sales result for the industry, Mr McEniry described the Australian economy as fundamentally strong due to pent-up demand that should ultimately break through as interest rates fall and people start spending again.

But he warned that a few more slowdown months were coming, extending into early next year as consumers defer new-car purchases – particularly large cars – for the time being.

“I think we will see a flattening,” he said. “But I’m not sure at this point that we will see a massive decline.

“We may for a month or two see a decline, but I don’t think it is going to be as tough as some of the previous economic downturns.”Mr McEniry said he did not expect the market to drop by the same amount it did during more recent recessions, when the total new-car market dropped from around 600,000 to less than 500,000 units in a short period of time.

“I think during the balance of this year it is going to be very flat, and probably into the first quarter of next year. And I think that it will be driven even more by people... saying: ‘I think I’ll wait until things settle down’.”

Mr McEniry was confident that although people were tightening their belts in the lead-up to Christmas, they will start to spend again after the holiday season passes.

“People don’t want to spend too much before Christmas and then have the post-Christmas credit-card debt and all the stuff that goes with that,” he said. “I think people are just being cautious for a while.

Mr McEniry said he was hopeful that consumers will eventually react to both the measures that governments around the world are taking to restore security in the financial markets, as well as to the inherent good health of the Australian economy.

He pointed to the fact there was still plenty of room for interest rates to go down further to help stimulate housing demand in Australia, particularly as there are still severe housing shortages in some areas, such as in Perth and Melbourne.

“I think (these actions) will give people a little bit more confidence,” Mr McEniry stated. “So there are some underlying strengths in the Australian market to help (save) the day.”Despite the silver-lining outlook, Mr McEniry quickly added that there are still many unknown variables at play that can keep on spooking consumers.

“But it is so unpredictable,” he stressed, referring to the most recent spate of stock-market falls around the world, even in the wake of governmental action taken this month to stem panic sell-offs.

Still, slower-than-anticipated mid-year sales are seen as a good indicator for an early upturn in consumer demand.

“One of the things we also found was that during the end of the financial year, there wasn’t the normal kick-up in ‘end-of-financial-year’ purchasing, which also says that people are deferring purchases, particularly for things like light commercial (vehicles).

“Therefore there is a bit of pent-up demand that will come through.

“But the problem with that is forced markets – not a natural demand, so there is a lot of forcing going on with registrations – and that can be a problem with a ‘bow wave’ effect that needs to be cleared out.

“People have to be very careful in doing that, because it gives them false impressions.”The MMAL boss believes that Mitsubishi Motors Corporation’s decision to cease Australian manufacturing has left it in a stronger position than some others.

“(Am I glad we’re not manufacturers anymore?) Absolutely.

“Over the last couple of years we had not built up the dependency on the local product that some of the other locals got, so we were able to balance the portfolio better.

“But that (large-car) segment unfortunately is not growing, so therefore there is continual pressure.

“And even though the dollar is in the right position, the export markets that a lot of those vehicles are going to are going through the same economic turbulence because it is global.

“And as you are well aware, the local manufacturers are trying to balance that position their stock holdings and inventory, and alternating their production schedules accordingly.”

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