Market Insight: It’s tough at the top

THE Australian motor industry’s escalating competitiveness and market fragmentation is set to intensify in the next few years as the three remaining car-makers close their factories and fight for position on an increasingly even battlefield.

Presiding over the current top full-line importer and Australia’s number-three brand overall, Mazda Australia managing director Martin Benders said this week that he expected Toyota’s dominance of the industry to continue to erode, coming slowly back towards the main field where leadership could be contested by several brands at around 15 per cent market share.

As GoAuto has reported, this is the point where Holden chairman and managing director Gerry Dorizas believes the lion brand can – by the end of the decade – take back market leadership from Toyota, which currently has an 18.1 per cent share compared to Holden’s 10.1 per cent and Mazda’s 9.2.

The gap is narrowing, with Toyota down 0.51 percentage points this year – and a long way from the 24 per cent it held in 2008 – while Holden is up 0.83 points year to date, with the General Motors branch on the comeback trail from last year’s 9.9 per cent return but resigned to the fact that the 22 per cent it held as market leader in 2002 was from a bygone era.

Mr Benders, who has no designs on outright leadership given Mazda does not compete in several market segments, likened Australia’s situation with Spain.

Many of the world’s biggest car manufacturers have factories in Spain – including GM/Opel, Ford, VW, Seat/Audi, Renault, Nissan, PSA Peugeot Citroen, Iveco and Mercedes – with some 17 production plants producing 2.163 million cars last year. A massive 87 per cent of these were exported.

Notably, Spain does not have the same degree of protectionism for its car-makers seen in other European countries, while government incentives such as a heavily subsidised scrappage scheme put in place to help reverse the country’s recent downturn in new-vehicle sales have benefited all brands.

“Looking at Germany, half the market is the three premiums (Audi, BMW and Mercedes) and Volkswagen. They look after their industry. If you go to France it’s the same thing,” Mr Benders said.

“If you go to Spain, even though a lot of those companies have got plants down there, the top 10 are all seven or eight per cent. You could throw a blanket over the top 10 almost it’s very evenly spread.

“I think without any assembly it’s probably going to happen here as well.”

The latest figures from the Association of Spanish Automobile Manufacturers (ANFAC) show the evenness of new-vehicle sales in Spain, with market leader Volkswagen holding a 9.4 per cent market share with 56,759 new registrations (covering passenger cars and commercial vehicles) to the end of July, which puts it just ahead of Peugeot on 8.2 per cent (49,619 sales), Renault and Citroen each on 7.8 (47,449 and 47,125 respectively), Opel on 7.6 (46,267), Seat on 7.5 (45,707) and Ford on 7.0 (42,278).

That is only a 2.4 per cent difference between first and seventh, with a variety of other brands around the four to five per cent share mark, including Dacia, Fiat, Audi, Nissan and Toyota.

Just like Australia, Spain has a huge number of brands and models available in the marketplace – at last count there were 62 brands slugging it out, compared to 67 in Australia.

Here, however, the difference between the market leader and seventh in share terms is currently 12.3 per cent, with Toyota’s 18.1 per cent share (117,591) still well clear of Holden’s 10.1 (65,763), Mazda’s 9.2 (59,958), Hyundai on 8.9 (57,948), Ford on 7.5 (48,452), Nissan on 5.9 (38,606) and Mitsubishi on 5.8 (37,718).

VW is also closing the gap with 5.0 per cent (32,562) so far this year, while virtually all brands at this level have aspirations of at least a 10 per cent share – or around 100,000 annual sales – in the short to medium term.

Honda (currently 2.8) and Kia (2.7) are working to achieve at least five per cent and Subaru is holding its own at just below four per cent (3.6) – the sort of mark that Jeep (2.6) and Mercedes-Benz (2.7) could be at before too long.

Hyundai looks set to overtake Mazda at some point, based on its current trajectory, while Holden has made it clear that it wants 15 per cent – and leadership.

As recently as last year Toyota was sticking to its goal of securing a 25 per cent share, however this position was made before its decision to follow Holden and Ford in pulling out of car manufacturing in Australia – and is one its competitors consider to be unattainable.

Of course, Toyota has not lost its grip on the marketplace, but its share has never returned past 20 per cent since the 2011 Japanese earthquake and tsunami, and the Thai flood disaster that same year, pegged it back to 18 per cent.

In 2012 it recovered to 19.6, only to slip to 18.9 last year, and now, after seven months of trading, is at 18.1.

While Toyota’s sales have fallen 4.8 per cent this year, Holden’s have climbed 6.6 per cent, thanks in large part to its rejuvenated locally produced large cars that reach the end of the line when the company closes its factories in 2017.

As we have reported, both brands will lose the benefits that come with manufacturing in Australia, such as preferential treatment with government and private fleet purchasing policies, and individual buyer loyalty and favouritism that stem from heritage, employment and local production.

Strip much of that away and the car companies offering the best value in the eyes of Australian consumers – in terms of model deals and overall brand – will rule the Australian marketplace, and many in the industry are banking on several marques slugging it out at the top end – not just the one with a triple-oval emblem.