"Why don't you build people like us a vehicle to go to church on Sunday, and which can carry our pigs to market on Monday?” - letter to Ford Motors Australia, 1932
The story goes that the creation of the utility vehicle or "ute" owes something to a letter from the unnamed wife of a farmer in Victoria asking Ford Motors in Geelong the above question. Whether or not this is true, we'll never know. What we do know, is that in 1934 Ford released the first Australian ute, and that Henry Ford nicknamed it the "kangaroo chaser." Due to its rugged practicality, the ute was an instant hit with farmers, tradies and factory workers.
Fast forward to today, and the ute is officially Australia's favourite vehicle. In 2015, three of the top ten best-selling vehicles in Australia were utes (the Toyota Hilux, Ford Ranger and Mitsubishi Triton), and in 2016 the Hilux was Australia's best-selling car (with the Ford Ranger and Mitsubishi Triton again making the top 10). In the first half of 2017, light commercial vehicles (LCVs), the category to which utes belong, saw the strongest growth in popularity, taking their market share to roughly 20% by the end of June.
Leading this charge were the Toyota Hilux and Ford Ranger, the two top-selling cars of the first half of 2017. Since July they have been vying for top spot, meaning that year to date LCV sales are well up on 2016. The rise in popularity of the LCV has been noticed by other carmakers with luxury brands such as Mercedes-Benz, as well as Korean brands like Hyundai and Kia getting in on the action. Presumably, there are no kangaroos to chase in Germany and Korea, so these models were very much built with Australia in mind.
Although catalysts such as the mining and subsequent construction boom contributed to the ute’s rise in popularity , recent years have also seen it become more visible in suburbia. Around 70% of ute sales go into business, government and rental fleets, which means a substantial chunk of buyers are regular folk looking for a practical, yet fun choice. "The ute market has changed dramatically," Tony Cramb the outgoing Toyota Australia sales and marketing director told Cars Guide. “A lot of people use them as family cars these days.” Dads who want to look a little tough when they hit Bunnings, and load the car up with reno materials, I'm looking at you.
Due to their ubiquity and widespread commercial use, pricing on utes is highly visible. Want to know the price of a Hilux? No problem. Head to the Toyota website, plug in your postcode, choose some specs, and you're off. For example, after just a few clicks, I had specced up a top of the line SR5 for $64,234 drive away. Easy as shopping for a T-shirt.
People who buy utes do so with the knowledge that their vehicle is going to get beat up a bit, and this is where a problem comes in. While prices of utes themselves are highly visible, getting pricing on parts isn’t as straightforward. Looking across to the U.S and U.K, there are massive online automotive marketplaces such as AutopartsUK, and even Amazon. In Australia we currently lack these options, but that's not to say this isn't changing. Australian listed company Carsales.com (ASX:CAR) recently launched partsales.com, and as you have no doubt heard Amazon has arrived on Australian shores and is open.
If there’s one thing that car dealers are good at other than selling cars, it’s selling car warranties. With dealers well aware that customers who service with them are more likely to purchase from them again in the future, they are experts at making sure a customer returns when it comes time to service or repair their vehicles. In a Q&A with Mike Costello at Caradvice.com.au, Volkswagen Group Australia’s managing director, Michael Bartsch relates the following advice from his first boss “you’ll always sell the first car out of the showroom, but the second out of the workshop”. He goes on to say “I would actually like to see a world where the workshop is the front end of the business and the showroom is the back end.”
This is important, because when dealers fix vehicles, they use Original Equipment Manufacturer (OEM) parts. The advantage of this is that it is an easy and relatively painless process. The disadvantage is that OEM parts often come with a hefty price tag. According to the Property Casualty Association of America (PCI), OEM parts can cost 60% more than their aftermarket equivalents. So how about when it comes to the Australian market? Are carmakers pricing their parts correctly?
Luckily, pricing “mystery shopping” is part (get it?) of what we do here at ACA Research. We asked our team to get us price points on five common service parts (air filter, oil filter, cabin filter, oil per litre, fuel filter) for some popular utes. Keep in mind that these results are shown as a guide, and are not as statistically robust as they would be if we'd run a full scale project, but our exploration showed a substantial discrepancy between pricing on OEM parts and those found in the aftermarket. This ranges from a few dollars up to almost $300, with the Holden Colorado costing $429.40 for OEM parts, against $149.63 in the aftermarket, a discrepancy of $279.77. Overall, the average difference across eight utes was $96.37.
Does your business manufacture, wholesale or retail parts for the Australian market? Would you like to learn more about how ACA Research can help your business identify and size new opportunities, evaluate the competitive landscape, and optimise your go to market strategy?
For more information, contact:
Head of Operations
Head of Automotive