Car industry feels effects of coronavirus

Australian new car sales are on track for their worst year since the Global Financial Crisis.

With the car industry in crisis mode globally as a result of the coronavirus (COVID-19), virtually all Australian car companies are reporting dramatically reduced traffic in dealerships and softening sales, according to Federal Chamber of Automotive Industries (FCAI) chief executive Tony Weber. 

Speaking to the RACQ ahead of the release of the March new car sales figures, Mr Weber said the industry was coming off the back of a 3% decline in the new car sales in 2018, followed by a 7.8 per cent decline in 2019, with the first two months of 2020 also reporting negative year-on-year growth. 

Some analysts are predicting new vehicle sales this year will fall below one million units for the first time since 2009.

“I haven't seen the data yet, but I expect that March 2020 will be negative as well,” said Mr Weber. 

“That will be the 24th month in a row of negative sales in this country. So, the industry was doing it tough to start with and COVID19 is going to bring up more challenges.” 

While acknowledging that the country’s top priority was to address the public health issues, Mr Weber said it was, “absolutely critical that the industry does everything it can to keep the doors open and to keep sales flowing.” 

“Fundamentally, this is a health emergency, a public health emergency and we need to work our way through it and then other issues will follow,” he said. 

While most Australians have been impacted by stay-at-home measures, and many others have lost their livelihoods, Mr Weber said he believed the underlying demand for new vehicles would remain strong, particularly as people avoid public transport due to social distancing rules. 

“Motor vehicles are essential for our normal way of life, and they’re even more essential in this period,” he said.

“It's important that the dealers put in place the facility to have cars serviced, and that people can have access – with less contact, obviously – to get in and replace or buy new cars.

“You've got to leave these service facilities open and give confidence to the consumer about going in and having their car serviced. Because, as I said, cars are going to be more important to us than ever in the next six months.”

"Most, if not all, of the transaction can be undertaken electronically."

Mr Weber said many dealers were already responding to the challenges by changing established business practices.

“There are things that can be done to prevent the transmission of disease between people,” he said.

“For instance, there are plastic bags being provided at dealerships, where you drop your key into the plastic bag, and the technician picks up the plastic bag, seals it and can open and drive your car without ever touching your key. 

“Then there’s new hygiene issues like cleaning the car steering wheel, putting covers over the seats, the technician wearing gloves, maintaining social distance within the dealership, all these things are important.”

While the states and territories all have different approaches to the issue of which businesses are able to remain open, Mr Weber said it was his understanding that car dealerships remained open in every state and territory and that “advice from certain states has been that they’re encouraging dealerships to remain open for both sales and service.” 

Mr Weber said there were also ways to operate, other than the traditional model of visiting dealerships.

He pointed to some dealers who were proactively pursuing initiatives like virtual sales consultations, using smart phones for video tours of vehicles, online appraisals of cars for trade-ins, and contactless test drives, where the dealer brings the vehicle to the client, disinfects it and hands the keys over in a zip-lock bag. 

Mr Weber said he also expected to see more new initiatives from car companies themselves, such as set pricing, to avoid the need for people to haggle online, extended warranty provisions, and better-equipped special editions, to name a few.

“I would encourage consumers to ring up the dealership if they are serious about buying a car,” he said.

“I'm sure the dealer can arrange a test drive; they can bring the car to you.

“Most, if not all, of the transaction can be undertaken electronically. I think a lot can be done to facilitate this. And I think it's important that both the dealerships and the customers work through this to make it happen.

Speaking about the impact of the automotive industry manufacturing shutdowns that have been occurring in many parts of the world, and the associated disruption to supply chains, Mr Weber said he was, “not aware of any major problems with supply in Australia.” 

“At the moment supply seems pretty good, but obviously as we go further into this international crisis and if the support chains break down, then that that could be a problem,” he said.

“But it's not an issue of the moment and from what I understand, there's a good supply of stock around in the country.”

With the market divided roughly 50-50 between fleet and private sales, Mr Weber also pointed to the government’s first stimulus package, which included investment incentives and an increased instant asset write-off threshold, as sending positive signals to both consumers and the industry.

“Part of the first stimulus package was instant asset write off,” he said.

“For businesses that is a very attractive option, and they can exercise that by buying a car.

“On top of that we've got the JobKeeper package, which is $130 billion, which is an astronomical amount of money. 

“Notwithstanding that, with all these large public funded programs, there's always issues around eligibility and the administration of the schemes, but in broad terms that is an enormously powerful package, which hopefully will keep the wheels of the economy lubricated. 

“That means bringing customers into the industry who are buying new cars and keeping the doors open of car dealers, so that the industry can keep ticking over along with the economy. 

“Because that's the challenge; we need to address the public health issue, but also retain some momentum in the economy, which is really important for us as an industry.”