Australia Autos Report Q4 2009

Tax breaks on company assets have helped to stimulate car sales in Australia, but by July, sales were falling once again as the 30% reduction in tax for larger companies came to an end. Total vehicle sales for the month fell by 10.3% year-on-year (y-o-y) and 26.7% compared to June. When the sales are broken down by segment, it is noticeable that the Upper Large car segment, which includes larger executive cars, suffered the largest drop in sales in July. Segment sales were down by 45.8% y-o-y, compared to a drop of 19% for the large car segment and 23.3% for the medium class.

Total vehicle sales for the seven-month period were down by 15.3% to 530,556 units, which is in line with BMI's forecast for a 15% decline in the market to 855,000 units in 2009. However, carmakers are finding ways around the downturn. GM Holden is looking to tap the growth potential in China and will increase output of its V6 engines from 6,000 to 20,000 annual units over the next four years in order to fulfil a contract to supply Shanghai General Motors. Ties between the two countries are set to grow after Australia's federal industry minister, Senator Kim Carr, returned from a trip to China with the news that Geely Automobile and Chery Automobile were both looking to enter Australia.

This supports BMI's Business Environment Ratings for the automotive industry in Asia Pacific, where Australia now leads the regional rankings, with a much higher score of 70.1 out of a possible 100, compared with 65.3 in the last ratings. The developed nature of the country means that Australia is at a disadvantage due the near-saturation status of its autos market, which reduces growth potential. On the other hand, a high GDP increases purchasing power, while market risks are reduced by low levels of corruption and a strong legal framework. This is reflected in the market's high score for its low risk to realisation of returns. Its country structure score has also risen from 66.7 to 87.2.

Carmakers continue to suffer in the meantime, however. Among the top 10 manufacturers, however, only Hyundai Motor registered positive sales growth in July as its sales rose 65.6% y-o-y from 3,759 units to 6,226 units. This marks a consistently strong performance for the South Korean brand throughout the seven months to July, with sales up by 28.3% y-o-y at 36,161 units to take the company from eighth to fifth in sales volume terms for the period. Despite a 25% drop in sales for the seven-month period, Toyota Motor continues to lead the market with a market share of 20.9%, easily ahead of its nearest rival GM Holden on 12%.