This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Bookmark Email Print page

Another record year as motor industry benefits from low interest rates and strong Australian dollar


DOWNLOAD  

15 April 2013: Australian motor dealerships sold 1,112,032 new vehicles (see graph1) in 2012 up 10.2% from 2011 (see graph 2), according to the latest annual Deloitte Motor Industry Report. This record breaking year was achieved against a backdrop of favourable economic conditions as Australia benefited from strong ties to emerging economies, low interest rates and a strong Australian dollar.

This year Deloitte Motor Industry Services has made it easier than ever for Australian dealers to benchmark their own performance against their peers in real time and in addition have created a ProfitFocus iPhone app which is free to download from the App store.

The average return on sales for 2012, across all segments of the industry comfortably exceeded 2% - well above the long-term average over the last six years of 1.4% (see graph 3). Support from global manufacturer funded consumer finance incentives and marketing has also boosted the local market.

Danny Rezek, Motor Industry Services lead partner, said: “While many of the large economies in Europe found consumer confidence constrained by public debt and austerity measures in 2012, the Australian market performed strongly for the global motor industry and achieved another record year.”

“The relative strength of the economy has led to global manufacturers looking to incentivise new car sales in Australia. The availability of the latest models coupled with beneficial finance terms and manufacturer funded interest free periods has helped dealers to engage with consumers and achieve positive sales growth.”

“The dealer networks in Australia have weathered some difficult years and during this time they have proven themselves to be a flexible and resilient group. Although things have improved from an economic perspective, the top performers still have a relentless focus on operational efficiency, customer relationship management and building a balanced revenue mix.”

According to the Deloitte Motor Industry Report, new car sales growth should be just one part of the dealers mix. The best dealers manage to achieve growth across their entire portfolio, with used cars, parts and servicing, finance and insurance delivering profits too.

According to Mr Rezek, the spike in dealer profitability in June and December could be an indicator that more profitability is coming through volume and incentive bonuses.

“New vehicle profit margins are lower than before and dealerships need to look at ways of offsetting this. Finance & Insurance (F&I) is one area of profitable growth, but dealers also need to take their fair share of used car sales. For the last two years the private to private market has seen 61% of used car sales, with Dealers only taking a 33% share.”

“With increased new car volumes they will get the opportunity to look at more trade-ins and the best are able to maximise this opportunity too, by taking back more used car sales from the private sale market. All of these used cars began their life on a dealer’s lot, it’s what they do after that initial sale that increases or decreases the likelihood of that customer coming back with a trade in.”

Profitability

Commenting further, Mr Rezek said, “We see a growing gulf between average and best performing dealerships. The gross profit margin at average dealers can be wafer thin and they are often heavily leveraged in terms of stock and fixed operational costs. The leading dealerships have their operation running efficiently and understand how to attract and retain customers.”

However, the main source of profitability wasn’t the core dealership activities of new and used car sales, parts and service. As in previous years, Australian dealers are increasingly relying on F&I sales to drive profitability, a trend that was first identified in the 2010 Deloitte Motor Industry Report.

“While it is a valid source of income for a motor dealer, there are many dealers who rely on F&I too heavily,” said Mr Rezek.

According to Mr Rezek, due to the intensely competitive nature of the local market the game is changing for Australian dealers.

Looking forward he said, “This year has started strongly in terms of units sold, if it continues we could be looking at another record year. Whatever happens this year, I’m confident the ever adaptable Australian automotive dealer will continue to prove that they are well equipped to respond.”

Graph 1: Total Market New Vehicle Sales - See the graph in the downloadable version of the media release
(*Federal Chamber of Automotive Industries (FCAI)

Forecast as at January 2013

Graph 2: Global Market Performance – 2012 Calendar Year - New vehicle sales volumes and growth 2012 - See the graph in the downloadable version of the media release

Graph 3: New Vehicle Sales vs. Dealer Profitability (Net Profit as a % of Sales) – 2006 - 2011 (Source of all graphs is the Deloitte Motor Industry Report.) - See the graph in the downloadable version of the media release

Media can access the report detail using the log in details:
User Name:      IO_Deloitte
Password:        misq1#2013

NB: See our media releases and research at www.deloitte.com.au.

Follow us – @DeloitteNewsAU

Last Updated: 

Contacts

Name:
Danny Rezek
Company:
Deloitte Western Sydney
Job Title:
Office Managing partner
Phone:
Tel: +61 2 9322 3889; Mobile: 0412 627 781
Email
drezek@deloitte.com.au
Name:
Johnny Sollitt-Davis
Company:
Deloitte Australia
Job Title:
Corporate Affairs & Communications
Phone:
Tel: +61 2 9322 7256, Mobile: 0431 134 850
Email
jsollittdavis@deloitte.com.au

Related links

Share

 

 

Follow us



 

Talk to us