Australia Autos Report Q1 2008

Australian new vehicle sales looked certain to breach the one million unit mark for the first time ever in 2007, as sales for the year to November rose by 8% y-o-y to 963,732 units. Despite already projecting sales of over one million units, BMI has raised its sales estimate for the year to growth of 9.5% to take sales to over 1.05mn units. For the year to November, all vehicle segments registered positive growth, led by the upper-large car category, up by 30.5% y-o-y. Sales of SUVs are also up, by 15.6%, underlining the return to popularity of larger vehicles.

However, domestic production operations are under scrutiny as a result of a strengthening Australian dollar and the possibility of lower import tariffs. As the Australian dollar reaches a record high of over US$0.90, import tariffs are also due for a cut from 10% to 5% in 2010, effectively reducing the competitiveness of domestically produced vehicles at home and on the export market. Japan's Toyota has claimed that it will be reviewing its Australian production operations if the tariff is reduced, while General Motors' subsidiary Holden has already seen its exports plummet from a record 60,000 units in 2005 to 46,000 in 2006. As a result, BMI is cautious about suggesting that output will have recovered by more than 1.5% in 2007 and by no more than 13% for the five years to 2012.

Despite being one of the more mature markets in the region, with a relatively high rate of vehicle ownership, Australia ranks joint fourth in BMI's Business Environment Ranking for the automotive industry in the Asia Pacific region. The country's economic risk rating has been lowered as the risk of inflation could force up interest rates and significantly curb consumer spending. Although the political risk rating has not been changed it will be under review as the new government begins to make its mark.

The carmakers producing in Australia still hold the upper hand in the market, despite their concerns over competitiveness. Toyota held 22.4% of the market in the year to November, followed by GM Holden on 14.1% and Ford on 10.3%. However, in terms of sales growth, Toyota and Mitsubishi seem to be the exceptions with growth of 10% and 22.3 y-o-y respectively, while Holden registered growth of just 0.9% and Ford's sales fell by 7.5%. Combined sales of locally manufactured vehicles fell by 0.4% y-o-y, while sales of imported brands rose by 8.8%.