We’ve shifted into high gear into 2017 and we’re nearly a quarter of the way around the track. To know where we’re going it’s crucial we understand where we’ve been. It’s time to review 2016’s automotive sales and the impact of ongoing changes in the Australian car industry. In our review of the VFACTS annual sales data we summarise key trends in the automotive industry, highlight the winners and losers and pose the question: Are we reaching peak automotive?
2016 Vehicle Sales
In 2016, the Australian market experienced further strong growth, with year-on-year car sales increasing by 2%, (building on the previous year’s 3.8% growth). The most notable growth has been in commercial fleet sales recording an astonishing 13% increase year-on-year, while in contrast private sales have declined by 5.8%.
The buoyant SUV category, with an 8% sales increase, continues to drive the growth in automotive sales, with SUVs now accounting for 37.4% of all new car sales in Australia. Toyota (63,099) and Mazda (48,021) continue to outperform competitors with combined sales of 111,120 SUVs in 2016, a 10% increase from 2015 , which accounted for 25% of the SUV market.
With Toyota, Holden and Ford closing their Australian production facilities, sales of Australian made cars continued to fall. Japan (28%) and Thailand (24%) remain the two largest individual sources of vehicles for the Australian market, making up more than half of vehicles sold.
Within Australia, the highest number of new vehicles sold was in New South Wales, closely followed by Victoria. Sales across the eastern seaboard increased, yet Western Australia witnessed another year of decline, as the end of the mining boom continues to hit the State’s economy hard.
While passenger vehicles sales volumes have declined year-on-year, they continue to be the category leader, accounting for 41.3% of all new car sales in Australia. However, as SUVs continue their upward surge, we can expect to see this segment of the market overtaking passenger vehicle sales at some point during 2017-18.
Sales of light commercial vehicles increased by 9.4% in 2015, driven by strong demand from business buyers for utes. Conversely, ute sales to private buyers declined in 2016.
At a model level, the big story is the rapid ascendance of the Toyota Hilux to top spot in the pecking order for Australia’s top selling vehicle, with the Ford Ranger moving into 4th place. Competition at the higher end of the ute market is only going to intensify, with Mercedes and Renault launching models into the market in 2017. Hyundai bucked the downward trend in the passenger car market, with sales of the i30 increasing by 16.9%.
Looking at overall car sales, Toyota dominates with a 17.8% market share, with Holden now demoted to fourth place, overtaken by Hyundai. Holden’s future model line-up of overseas manufactured vehicles may ultimately prove to be an opportunity to regain lost ground.
Following the well-trodden footpath of its Korean sister company, Kia is making significant in-roads into the Australian market with a 20% increase in passenger car sales and a 40% increase in SUV sales. With a strong technology play, backed by a seven year unlimited km warranty, seven years capped price servicing and seven years road side assistance we expect Kia to grow it’s share of new vehicle sales. We are also seeing a blurring of the lines between luxury and mass vehicle brands. For example, Mercedes Benz, (with the GLA and GLC), and BMW (with the X1 and X3) are both aggressively pushing into the mainstream SUV market. Conversely, Hyundai is making a play for the luxury segment of the market, by spinning-off Genesis Motors as a separate division with the new G80 set to be unveiled in 2017 in Australia.
Autonomous Vehicles Soon to Enter the Race
Looking further ahead, the broader questions are: when will be reach peak automotive in the Australian market; and when might we see the first sale of a fully autonomous vehicle?
With the Australian national vehicle fleet growing 2.1% from 2015 to 2016 to a total of 18.4 million registered vehicles at 31 January 2016, the signs are that the automotive in Australia market has not yet reached saturation point. The main drivers of demand, population growth (currently at 1.6% p.a.) and business formation rates are on an upward trend.
However, other factors such as the growth of car sharing and pooling, increasing urbanisation, and a shift away from car ownership among younger demographic segments may dampen future demand. Looking overseas, both Toyota and Nissan expect a decline in future sales in the United States, but anticipate growth in key Asian markets.
Our view is that Australia will continue to be a competitive, dynamic and expanding automotive market in the near term. However, looking at how leading OEM’s envision the future, (for example Ford’s Smart Mobility plan), the inescapable conclusion is that we are on the cusp of a transformation change in the automotive industry.
The introduction of fully autonomous vehicles will have a major impact on how we think about our mobility needs and where car ownership and usage fits into this. The question about when is likely to be determined by how quickly our regulators get to grips with the impact of this technology but most leading OEMs are expecting to introduce a fully driverless car into the market by 2025 at the latest and have plans to retrofit existing vehicles within a similar timeframe.
As the industry evolves to meet the challenges presented by these changes, ACA will continue to conduct research that will uncover emerging trends and provide valuable, actionable insights. To make sure you are the first to receive any new published research reports, please subscribe to our automotive blog by clicking here.
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Wishing you a prosperous 2017.