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Buyer choice hurting large car sales: Holden

Sales slide: Large car sales slumped 10.7 per cent or 21,846 units last year.

Novated leasing and reduced import tariffs cut into large car sales

7 Feb 2005

THE rise in buyer choice thanks to novated leasing and the cut in import tariffs poses a long-term threat to locally built mid-priced, prestige and luxury cars, contends Holden executive director sales and marketing Ross McKenzie.

While Mr McKenzie believes the bottom-end tool of trade fleet cars and the sports-honed V8 models that are locally manufactured have strong futures, he is less convinced about the models that sit inbetween.

"I think the luxury cars are the challenge and I think some of the supposedly better basic cars like the Acclaim and SV6 have a lot of competition," he said.

Novated leasing has allowed middle and upper management to be far wider in their selection of company vehicle, rather than just making do with what the employer once offered after it negotiated a deal with a local manufacturer.

Where a Berlina or Calais would have been the choice if the deal had been done with Holden, now thanks to novated leasing an employee can choose any vehicle listed within his or her price band.

"The advent of novated leasing and the growth of that is really changing the dynamic at the moment," Mr McKenzie said. "That’s the key and that’s what I think will in the long haul make it harder and harder for large cars.

"The guy who wants a nice family car on a novated lease is going to look at an (Commodore) SV6 because it suits his image and he is also going to look, because of his family, at some of the SUV products."But, either side of that middle and luxury band, Mr McKenzie says large cars have a stronger and more sustainable base to work with.

"The basic tools of trade – which is Executive and Acclaim – are being bought in big volume, are being handed out for blokes to drive around in during the day and I am not sure that is going to change unless you come up with something else as a tool of trade car," he said.

"Then you have got all the sports models which to some degree are unique, particularly V8 SSs and HSVs. You don’t have imported cars that compete with those and I think they will continue to sell well."Mr McKenzie’s frank view of the difficulties facing traditional locally manufactured large cars is reflected in the 2004 VFACTS sales results. Large cars slumped 10.7 per cent or 21,846 sales in a record market where SUV sales, in particular, boomed. Both Commodore and Falcon sales fell, while the aged Mitsubishi Magna/Verada plummeted.

Calais and Berlina accounted for about 15 per cent of total Commodore sedan and wagon domestic sales, which numbered 79,170 in 2004.

While the market grows it also fragments, so while large car volume is still strong at about 180,000 per annum it is no longer the dominant player, splitting share leadership with small cars and the combined SUV categories. But for Holden, Ford, Mitsubishi and Toyota, the health of the large car segment is hugely important because it has traditionally underpinned their local survival as manufacturers.

Meanwhile, the five per cent cut in import tariffs has been felt most keenly at the top-end of the market where Audi, BMW and Lexus have all dropped pricing post January 1.

The cheapest BMW six-cylinder 3 Series, the 320i, is now within $3000 of a Calais V8 after a reduction of $2600 on recommended retail price, while a $2700 cut for the 325i means it is a little under $10,000 dearer.

"When you go through the five per cent tariff reduction, the price impact at the bottom end of the market is okay," Mr McKenzie said.

"But the price impact at the top-end on a low model BMW is thousands of dollars.

"So the imported luxury cars have shifted down overnight, but Calais and everything else stay where they are, so we have a price competitiveness issue at the top end."

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