Car dealer group warns Australia has too many brands

Peak industry and advocacy group the Australian Automotive Dealer Association (AADA) has warned that Australia’s new car retail industry has reached a crisis point due to the unprecedented influx of new brands.

While consumers are celebrating the heightened competition leading to aggressive discounting and other sales incentives, the AADA cautions that a growing number of new car dealerships are under severe pressure and incurring financial losses.

The organisation claims the unrestricted growth of car brands in Australia presents risks for consumers including rapid depreciation of vehicles, a lag in parts supply, longer repair times and orphaned vehicles as brands disappear.

French car maker Citroën is the most recent example of a long-established brand that ceased operating here last November due to declining sales, ending its 101-year continuous presence in Australia.

Industry commentators are warning that more established brands could follow, with the AADA saying there are too many manufacturers operating here and calling for a pause on further car brands entering the market.

AADA CEO James Voortman (pictured below) said the September quarter had delivered the industry’s first negative quarterly profitability result since the global financial crisis.

“This is a clear warning that the commercial settings underpinning our industry are becoming unsustainable,” Mr Voortman said.

“The sheer number of brands arriving in Australia at a rapid pace is having profound consequences for Australian consumers and businesses alike.

“Dealers are facing intense competition, relentless pressure to take more stock and rising business costs.

“There are simply too many manufacturers operating in this market and we need a pause on further car brands… At a time when other countries are trying to slow the rate of change and number of brands, Australia is allowing unfettered access to this market.”

The number of brands in the Australian market has grown by 56% in five years, from 39 in 2021 to 67 in 2026, with most of the growth coming from new Chinese brands.

The growth shows no signs of slowing either, with brands reportedly targeting an Australian launch in 2027 including Aito, Avatr, Changan, Exlantix, Freelander, Hongqi, iCar, Jetour, Luxeed, Nevo, Rox Motor and Wey.

Australia already has one of the most competitive new car markets in the world, with an estimated 67 brands competing for a market of around 1.2 million vehicles.

By comparison, the UK has around 40 active brands servicing a market of more than 2 million vehicles, while in the US there are between 40 and 45 brands selling into a market of about 16.4 million vehicles.

The AADA says the unprecedented surge in new brands arriving in Australia is intensifying competition for customers and increasing pressure on automotive businesses.

“Australians benefit from choice and competition, but manufacturers’ growth ambitions must reflect what this market can support,” Mr Voortman said.

“Pushing excessive stock onto dealers is fuelling a race to the bottom. Aggressive discounting erodes margins and devalues vehicles while dealers carry the financing costs and risk of unsold vehicles.”

Mr Voortman said the economic environment had changed significantly, with pressure on household budgets making customers more cautious while dealerships faced substantial operating and inventory financing costs.

“Strong headline vehicle sales can conceal serious financial distress at the businesses making those sales. Dealers cannot keep absorbing higher costs, lower margins and greater stock risk indefinitely. 

"Dealers invest in local jobs, apprenticeships, technical training and the servicing and warranty support motorists rely on. Governments, manufacturers and suppliers all have a stake in keeping that network viable.”

The AADA has put forward a 10-point plan for Government, manufacturers and suppliers to consider, which includes: a pause on the entry of any new brands; the ability for dealers to decline excess stock without losing incentives or facing other commercial penalties; and prompt compensation for dealers when manufacturers reduce the price of vehicles already in stock.

The plan also includes a number of proposed regulatory changes including Unfair Trading Practices protections and Australian Consumer Law reforms.