Market Insight: Who’s buying?

DESPITE an economy experiencing high inflation, the recent October VFACTS sales figures show the Australian new car market is booming. There is every chance this year will be the strongest on record, surpassing the 1.1 million sales high of 2017.

This might seem odd to many Australian households, who are facing inflation not seen in decades.

The cost of living has increased six per cent this year alone, with food, fuel, electricity, insurance and mortgage costs stretching higher than ever – and even the cars themselves, are going up significantly.

This is against backdrop of a salary increase average of three per cent. This raises the question: just who has the money to buy so many extra new cars?

The sales figures from industry statistician VFACTS detail the figures, showing numbers of vehicles sold to private, business, government, rental, and heavy commercial buyers. It is in these numbers that there is at least an indication of who is spending big on new vehicles this year.

Most new cars still are registered to private buyers. This year, to the end of October, 527,301 vehicles – more than half the 1,006,095 sold so far this year – were sold to private owners, against 351,683 business buyers, 27,303 to governments and 56,973 to rental fleets.

It is the sales increases that are more telling.

While the whole market is up 12.0 per cent on average, private sales are up just 9.0 per cent. Indications are that even this increase in private purchases is because of better supply finally filling backorders.

In other words, this is money private buyers spent, or at least allocated, up to two years ago, rather than deciding now is a good time to buy a new car.

The rental market is also showing less than average, single-digit growth, with an 8.4 per cent sales increase compared with this time last year. Meanwhile, business is up 16.8 per cent, and government, while the lowest volume purchaser of new vehicles, has still bought a solid 19.9 per cent more vehicles this year than last.

The VFACTS analysis does not drill down to what type of vehicles each type of buyer spends their money on, but obviously commercial vehicles such as vans and trucks are less likely to be bought by private owners.

It is more likely to be business, with some fleet and government thrown in.

Those who have bought big trucks (Heavy Duty Trucks with more than 39000kg GVM) is up 18.8 per cent, or from 11,968 to 14,214 units. In 2018, there were just 6730 such trucks sold in the same period.

Meanwhile, the number of commercial vans – surely the staple of small and medium business, is not growing this year – in fact, it is down on last year’s figures.

The vans/cab-chassis less than 2.5 tonne segment is down 21.2 per cent compared to the same period last year (from 1248 to 983 units) while the vans/cab-chassis 2.5-3.5 tonne is down 13.4 per cent (from 19,676 to 17,045 units).

Although the 2018 results were about the same for the 2.5-3.5 tonne van segment (17,189) the sales of smaller vans (less than 2.5 tonne) have declined sharply from the 2701 sold in the first 10 months of 2018.

Why business finds small delivery vans on the nose is unclear, but there is not only fewer selling, but also fewer to choose from.

There were six models competing in the small van market in 2018 Citroen Berlingo, Fiat Doblo, Peugeot Partner, Renault Kangoo, Suzuki APV and Volkswagen Caddy); in 2023, there are just three (Peugeot Partner, Renault Kangoo and Volkswagen Caddy).

For now, at least, the market is indeed booming, but it might just be a post-COVID-19 catch-up. A combination of more private back orders being filled than usual and more big business cycling their truck fleets and government their vehicle fleets than usual.

What happens next is unclear, but given the economic backdrop, the heat in the market can not last forever.