Market Insight: Small cars in heavyweight bout

HOLDEN’S Cruze and Hyundai’s i30 are slugging it out in the Australian small car fleet business, with the locally assembled Cruze winning more business buyers while the imported i30 has the edge in government purchases.

Figures seen by GoAuto show the two vehicles also dominate rental company small-car sales, with at least one in 10 vehicles from both models being unloaded into this low-profit sales arena.

Unsurprisingly, the Cruze and i30 also have the lowest percentage of private sales among the top contenders in the small-car segment, with private buyers taking about 58 per cent of Cruze’s 19,452 sales so far this year, and 48 per cent of i30’s 17,144 units.

This compares with 87 per cent for the segment-leading Mazda3. The Japanese importer has delivered more than 21,000 out of its 24,502 small car sales this year to private purchasers, helping to make Mazda the number one seller of private vehicles in the nation, even though it is only ranked number four in total volume.

The three local car-makers – Toyota, Holden and Ford – have worked on increasing their share of the profitable private retails and reducing their dependence on fleet business in recent years, cutting their percentage of fleet sales from a reported 70 per cent in years gone by to about 55-60 per cent per cent today.

From top: Hyundai i30, Mazda3, Toyota Corolla, Volkswagen Golf, Mitsubishi Lancer, Subaru Impreza.

This unwillingness to dump cars into fleets at little or no profit simply to gain throughput at the factory has contributed to a decline in traditional large and medium car volumes in Australia while also opening the door for low-cost importers such as Hyundai to gain traction.

Toyota is still the dominant fleet player by a wide margin, ranking number one in both business and government volumes and number two to Holden in the rental market.

All up, about 60 per cent of Toyota vehicle sales end up on fleets, with most – 44,637 vehicles out of the total 98,108 Toyota sales in Australia this year – going directly to corporate buyers.

But Toyota’s imported small-car contender, the Corolla – once dominant in fleet small-car sales – has eased back to third place behind the Cruze and i30 in business, government and rental fleet sales this year, while its percentage of private buyers has risen to almost 68 per cent – on par with other Japanese imports such as the Mitsubishi Lancer and Subaru Impreza and not far behind the Volkswagen Golf (70 per cent).

Government business got a little more difficult for Toyota and its Corolla recently with Holden’s decision to manufacture the Cruze locally. Under federal government fleet purchasing rules, Australian-made cars – so-called Tier 1 vehicles – have to be given precedence over imports by federal fleet managers.

Only when a suitable vehicle cannot be found among those Tier 1 cars can a federal fleet or senior department official elect to select an imported vehicle.

As Cruze is the sole Tier 1 small car, it should have an advantage over other small cars, at the federal level, at least.

So far, the Hyundai i30 is still number one in government sales by a distance over the Cruze – 2433 to 1540 – revealing some governments and related ‘quangos’ are opting for the Korean car.

The VW Golf – one of the up-and-coming cars of the small-car segment, thanks to favourable Euro exchange rates – has no rental fleet sales and only tiny government fleet participation (110 vehicle or one per cent of Golf volume in the seven months to July).

However, the Golf is emerging as a major player in business fleets, possibly thanks to novated lease customers looking for a bit of European flair.

Almost 29 per cent of the Golf’s 10,523 sales YTD are attributed to business customers – a higher percentage than the Cruze, i30 or Corolla, and way ahead of the Mazda3’s tiny 12.5 per cent.

Similarly, the Subaru Impreza’s percentage of business sales is 30.2 per cent. Subaru also clearly does not bother chasing sales of Impreza in the rental or government markets (although it does sell Forester compact SUVs to those fleets), and maintains a strong private ownership rate of about 68 per cent.

Of all the small cars on the market, only eight nameplates have registered rental fleet sales in 2011, while 16 are credited with government sales.