Instant Asset Write-off and Accelerated Depreciation Deductions tax incentives likely to provide a much-needed boost to automotive dealerships.
COVID-19 has decimated sales of new passenger, SUV, and light commercial vehicles to business. March sales were 19% down on the previous year, while the peak lockdown period in April saw a 50% year-on-year decline from 31,244 to 15,758. While we've seen a level of recovery in May with 24,758 vehicles sold, this is still down 35% on May 2019, demonstrating the ongoing impact of the pandemic.
The Government stimulus package includes fiscal incentives to encourage investment in plant machinery and equipment. The ACA Research weekly COVID-19 SME Tracker assesses the impact of the Instant Asset Write-off and Accelerated Depreciation Deductions tax incentives on purchasing intent for light commercial vehicles, light duty trucks and passenger vehicles.
Data from the latest wave (week 6) shows there has been a rise in the proportion of fleets intending to use these measures to invest in new plant and equipment.
Nearly a third of SMEs with business vehicles now intend to use the Instant Asset Write-Off and a quarter intend to use the Accelerated Depreciation Deductions. These numbers are likely to increase as another quarter are undecided at this stage.
The proportion of truck fleets intending to use the instant asset write-off has remained strong and intent among those with a passenger vehicle has increased.
Among those that plan to use these tax incentives, demand varies by sector with 41% of those in construction looking to purchase a light commercial vehicle and 30% of those in distribution looking to purchase light duty trucks. Intent to purchase passenger vehicle sales is strongest among services (43%) and production (32%) businesses that plan to use these tax incentives.
In summary, the Government’s Instant Asset Write-off and Accelerated Depreciation Deductions tax incentives are likely to provide a much-needed boost to automotive dealerships. We also expect the growth in eCommerce, and demand for contactless delivery services to drive an uptake in sales of vans and light duty trucks. We're starting to see some evidence of this trend in the May numbers, and expect it to continue to develop through June.