8 Oct 18

SUVs overtake cars on Australian vehicle market

Low interest rates, tax breaks for LCVs and strong competition are driving new-vehicle sales in Australia. Year-to-date figures suggest 2018 could match 2017’s record-breaking 1.19 million units sold. 

Australia’s strong vehicle market is backed by a solid economy, the 12th-largest in the world and now growing for the 27th year in a row, thanks largely to robust trade links with China. Last year marked the third year of record vehicle sales, and if this year doesn’t beat 2017, it looks certain to beat the 2016 figure.

In more ways than total volume alone, last year was a record-breaker for Australia’s vehicle market. For the first time, SUVs (465,646 units, 39.2% market share) outsold cars (450,012 units, 37.8% market share). Last year, sales were especially negative for the large (-56.3%) and medium-sized (-31.3%) car segments. 

It all fits into a larger trend of booming SUV sales as those of cars slump, a trend that is persisting in 2018. Market share for SUVs and cars is continuing to diverge: 42.8% vs. 33.4% at the half-year mark. Passenger cars are also down in corporate fleets (-8.4%), their decline mirrored almost exactly by the rise of SUVs (+8.9%).

Utility vehicles
The Australian vehicle market, including the corporate segment, is expected to continue its shift away from passenger cars, and towards SUVs, and especially utility vehicles (a.k.a. ‘utes’: typically Australian pickup trucks with the cargo tray integrated into the vehicle body – see picture; U.S. trucks usually have a separate cargo tray). 

The best-selling models last year were the Toyota Hilux, the Ford Ranger and the Mitsubishi Triton –all three ‘utes’ popular with corporates as commercial vehicles.
Fleet vehicles
About 19,000 businesses in Australia operate fleets of at least 20 vehicles, which adds up to a total of around 2.16 million fleet vehicles. On top of that, another 400,000 businesses operate fleets of fewer than 20 vehicles. 

Key fleet-operating industries are mining and construction (LCVs and SUVs), telecommunications and utilities (cars and LCVs), vehicle rental companies (cars and SUVs) and federal, state and local governments. Together, governments, businesses and rental fleets were responsible for 52% of all new-vehicle sales in Australia last year.

Market trends 
Some interesting market trends in Australia:

  • Engine downsizing, from six to four cylinders. At issue is a reduction of cost and CO2 emissions. 
  • Leasing is popular, notably operational leasing and ‘sale and leaseback’ (a company sells its vehicles to a lessor and then lease them back).
  • Over the past decade, novated leasing has grown between 10% and 15% per year. The formula, unique to Australia, is a three-way deal between employer, employee and fleet management company (or another vehicle financier) that offers advantages to both employers and employees.
  • Car-sharing is slowly taking off. Local General Motors subsidiary Holden launched GM’s flexible leasing offer Maven Gig last year. It now has 1,000 members in Australia’s urban centres.
  • The size of the used-vehicle market in Australia is about 3 million units per year, with growth for wholesale remarketing projected at 5.2% for 2018-19 – fuelled by strong consumer demand and the continuing boom in construction on the East Coast.
Authored by: Frank Jacobs