Motor vehicle retailers continue to achieve record delivery figures despite the weak macroeconomic environment.
The first half of 2024 has been a strong period for motor vehicle sale volumes, continuing on from record-breaking sales numbers in 2023. Data from the Federal Chamber of Automotive Industries (FCAI), which reports the number of new vehicles sold, indicates that motor vehicle sales remain at record levels despite the weak macroeconomic environment.
According to the FCAI, 111,000 new vehicles were delivered in May 2024 – 5.1% higher than in May 2023, which had previously been the best May result ever. This takes new car deliveries in 2024 to 513,000, which is 12.2% higher than the same time last year. These sales provide a stark contrast to broader consumer trends. Real retail turnover fell 1.3% over the year to March 2024, with cost of living pressures forcing many households to cut back on purchases.
For motor vehicles, supply chains have largely recovered from pandemic-era disruptions and wait times for new cars have largely stabilised in 2024 (albeit at roughly double the average wait time seen before the pandemic). Despite no longer being able to rely on a backlog of orders, motor vehicle retailers have been able to keep defying gravity and post further growth in sales in 2024.
Prior to the pandemic, motor vehicle sales were boosted by a downward trend in prices with prices falling 9.5% over the decade to December 2019. Inflationary forces, product line-up, consumer preferences, stock availability, as well as supply chain challenges have seen this trend reverse with new cars 19.6% more expensive in March 2024 than four years earlier. This largely matches the inflationary environment across the Australian economy, with headline CPI growing 18.2% over the same time period. But much of this motor vehicle price growth is now in the rear view mirror. The motor vehicle CPI increased by just 0.4% over the year to March 2024, compared with the 3.6% increase in Australia’s broader CPI.
Chart 1: Share of Household Final Consumption Expenditure on motor vehicles
Source: ABS Australian National Accounts: National Income, Expenditure and Product
*share of consumption spending calculated as a 12 month rolling average at current prices
Supported by this recent price moderation, households have further prioritised spending on cars, with 2.9% of household spending over the year to March 2024 on motor vehicles. The share of household spending on vehicles has not been at this level since 2008.
Rising interest rates were largely expected to weaken demand for new cars, which are often financed through debt. Data from the Australian Bureau of Statistics on loan commitments shows that the value of new loans for road vehicles was 16.6% higher over the first four months of 2024 than the same period in 2023.
The current transaction volumes for motor vehicles are likely to be unsustainable. Consumers over the past two years have prioritised spending on vehicles, at the expense of other categories. The erosion of pandemic-era savings buffers and the continued impact of high interest rates will limit the ability of households to finance new purchases. The Deloitte Global State of the Consumer tracker reports that 18% of consumers are considering purchasing a new motor vehicle over the next six months, which is well below the 31% peak curiosity seen in July of 2022.
For further information on the motor vehicle sector, Deloitte Automotive Market Intelligence provides insights on trends, pressure points and opportunities, drawing on data from over 1,800 dealers.
This newsletter was distributed on 27th June 2023. For any questions/comments on this week's newsletter, please contact our authors:
This blog was co-authored by Chris Bates, Economist at Deloitte Access Economics
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