Market Insight: State of a car market’s health

AUSTRALIA has had a roller-coaster ride with the aftereffects of COVID-19 but each state has a different story to tell about the journey.

How each coped with the virus and its effect on the automobile industry can be attributed to more than one factor, although housing activity – especially the construction of new housing – seems to play a major role.

Building activity also gives a snapshot for future dealerships, indicating where there may be the greatest potential for expansion.

Queensland continues to appeal as a state that shows rising population and housing approvals, together with modest unemployment.

A subtropical climate in the state’s more populated south-east also creates an attractive picture for residents of other states to make a move, further improving Queensland’s appeal as a place to live and perhaps even establish car dealerships.

The 2020 fallout shows a world ravaged by COVID-19 and then washed by the waterfall effects of the virus all the way from production right through the logistics avenues and into the showroom.

It has been a difficult ride for everyone – customers, dealers, workers at the car plants, shipping fleets and all the people in between – and it has affected all the Australian states in much the same way.

Why then is there a discrepancy in how sales performed state by state? Much of this revolves around the economies of each state and, in particular, two economic barometers – employment and housing.

The old link between the number of new homes built and the sales of cars does not always apply. But the chances of buying a new car are obviously diminished by not having a job.

In the period between December 2014 and December 2022, house-building activity fell 23 per cent. In the same period, new vehicle sales fell 2.8 per cent and unemployment improved from six per cent in 2014 to 5.1 per cent in 2022.

During the nine years from 2014 to 2022, the states that improved their vehicle sales were Queensland (up five per cent) and Tasmania (up 8.3 per cent). 

The biggest fall was NT, down 10.4 per cent, NSW and Victoria (down five per cent each); WA (down eight per cent), with minor changes to the others.

Compare this to how some fared in the real estate market and we find Queensland had a 20.6 per cent increase in building approvals from 2014 to 2022 while Tasmania was up 32 per cent. 

On the negative side, housing approvals in the Northern Territory fell 73 per cent in the same period.

The mining state of WA could have fared a lot better than the data shows, particularly as it recorded high building approvals. Its holdup was getting the supply of vehicles – a national problem but in WA’s case, mostly hinged on what Toyota could supply to feed the resources sector.

In the year-to-date April 2023, the national light-commercial vehicle sector fell 8.9 per cent but in WA the fall was a less onerous 2.6 per cent. It recorded 2035 sales of the HiLux 4x4 in the first four months of this year, down 6.6 per cent compared with the same period in 2022 with the slip attributed to stock unavailability.

However, this compares favourably against nationwide sales of the HiLux 4x4 that have fallen 15.7 per cent YTD.

The variability of these results will alter again as new HiLux shipments arrive. Most OEMs are confident that supply is improving, although no-one will hint at a timetable as to when sales will return to the pre-pandemic level.

Dealers who watch the state-by-state economic, population and housing approval changes may be on the front foot for creating solid business moves.