AAAA Dashboard - Q1 2021 by aaaa710

DASHBOARD Q1 2021

The voice of the independent aftermarket in Australia Welcome to the Q1 2021 Edition of the Aftermarket Dashboard, a quarterly information service for members of the AAAA. This industry publication captures useful statistical and related data, as indicators of the unfolding trends and health of the automotive aftermarket industry, and has been designed to provide regular insight on our industry. We value your suggestions for improvement or feedback regarding content. Data sourced from VFACTS New Car Sales Data, ABS Motor Vehicle Census, ACA Research Consumer Automotive Survey

1. State of the Market

COVID-19 Impact

3. The 4WD Car Parc

4. Industry Headlines

1. State of the Market

Australian Economic Indicators Consumer Confidence

109.3

(15.7)

Westpac Melbourne Institute (Q1’ 21, vs. Q1’ 20)

Fuel Prices

Business Confidence

121.8

(21.4)

Roy Morgan (Q1’ 21, vs. Q1’ 20)

Consumer confidence has built on a strong Q4 2020 result, sitting around 16 points higher than the same time last year. Impressively, consumer sentiment reached 111.8 in March, just 0.2 points off the 10 year high we saw in December.

Business confidence has similarly remained strong, with March’s Index of 124.0 standing out as a seven year high. Again, this is a reflection of businesses being comfortable with how the pandemic is being managed throughout Australia.

This can most likely be attributed back to Australia’s effective control of COVID-19, and the promise of the vaccine rollout (albeit that this may fall off slightly in months ahead due to the delayed implementation).

Diving deeper into the results, almost two thirds of businesses expect good economic conditions in the year ahead, with more than half seeing the next 12 months as a good time to invest. This should drive positive outcomes as the Australian business community continues to recover.

$1.32

( 10.1c)

AiP - Ave weekly price (Q1’ 21, vs. Q4’ 20) Fuel prices have risen substantially in Q1 2021, driven by rising prices in February and March – hitting $1.31 and $1.39 respectively. This is driven by a combination of continuing high levels of local demand as Australian’s undertake local holidays, and crude oil prices lifting internationally. Despite this rise, the fuel price cycle has remained relatively stable, which is another positive sign indicating the economy is stabilising.

New Car Sales By Quarter Q1 2021 saw the new car market continue its recovery from the COVID-19 crisis, recording a double-digit increase on the same quarter last year. This result brings the quarter’s new car sales figures generally in line with 2018 (although still well below the strong 2018 result), demonstrating continued progress off the back of the Q4 2020 recovery.

263,648

Strong consumer and business confidence will likely see this trend continue throughout 2021; especially if international travel remains restricted and families turn to Australian adventures in the meantime.

2021 sales volume in Q1

+13%

350,000 300,000 250,000 200,000 150,000 100,000 50,000 0

Year-on-Year

268,538

Q2 Q3 2018

Q3 2019

Q2 Q3 2020

Q1 2021 5

New Car Sales By State The recovery in new car sales is reflected in the sales by state breakdown, where all states except the ACT improved in Q1 YoY sales. The ACT is clearly an outlier here, due to the one-off new vehicle sale spike in Q1 2020 as local residents replaced hail-damaged vehicles.

Building on this, most states also recorded double digit growth when compared to the same time last year, which is a credit to how well the pandemic has been managed. With COVID-19 now (hopefully) under control, we expect to see this recovery continue in the months ahead.

Q1 Volume

% Chng (YoY)

Q1 Share

New South Wales

85,328

14%

32%

Victoria

67,549

26%

Queensland

56,497

22%

21%

Western Australia

26,289

26%

10%

South Australia

17,010

17%

Australian Capital Territory

4,356

-31%

Tasmania

4,245

11%

Northern Territory

2,374

39%

263,648

+13%

State

TOTAL

New Car Sales By Marque Q1 Rank

Toyota 56,513 vehicles sold

Make 2021

Q1 Volume

% Chng YoY

Q1 Share

Toyota

56,513

13%

21%

Mazda

27,615

33%

10%

Hyundai

19,055

14%

4 1

Mitsubishi

17,811

5 1

Kia

17,173

11%

6 2

Ford

15,788

14%

Nissan

12,139

13%

Isuzu

10,080

55%

9 1

Subaru

10,074

28%

101

Volkswagen

9,089

-7%

TOTAL

263,648

+13%

The Q1 result is underpinned by strong sales across a range of brands, with eight of our top ten recording double-digit growth compared to Q1 2020 (and only Volkswagen recording a YoY decline). At the top of the ladder, Toyota remains entrenched as the local market leader (selling more than twice as many vehicles as its closest competitor). This can again be attributed largely to its market-leading Hilux ute (14,040 units sold, up 41% YoY). Looking at our strongest growth figures, Mazda has managed to slightly erode Toyota’s lead, holding a strong second place on the table, and continuing to cement itself as a key player in the Australian automotive industry. Alongside this, the continuing popularity of utes has led to significant growth for Isuzu, which ended the quarter in 8th place (just 6 sales ahead of Subaru). Whilst not making the top 10, Chinese brand MG has been surging in Q1, coming in with the 11th most sales at 8,728 (a rise of 163%). With an aggressive release schedule planned, we will be monitoring their progress to see how they perform through 2021.

2. COVID-19 Impact

Updated Sector Outlook 0%

-4%

-8%

-12% H2 2019

H1 2020

H2 2020

H1 2021

H2 2021

H1 2022

H2 2022

H1 2023

H2 2023

H1 2024

H2 2024

H1 2025

In a previous dashboard, published early in 2020, we considered the potential impact of the COVID-19 outbreak on vehicle servicing and repair. This presented three potential scenarios, with the most positive suggesting a swifter recovery, while the others extended this recovery timeframe off the back of further or more significant outbreaks. A year on, with the vaccine rollout in play, and vehicle sales on the rise, it seems our most optimistic scenario has won out. Under this option, overall service and repair revenues would return to pre-COVID levels by the second half of 2021. Driving this is the resilience to movement restrictions we’ve seen in private vehicle use, combined with changes in travel behaviour (in a number of cases at the expense of public transport as commuters seek greater control over hygiene and social distancing). With overseas travel looking to be restricted for the foreseeable future, vehicle usage (as well as the market for modifications for activities such as off-roading ) have also been bolstered by the increased interest in domestic travel.

Factors Impacting the Aftermarket % Difference in Traffic Volumes (NSW & VIC*) YOY 2020-21 Jan-20 15%

GROWTH DECLINE

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Feb-21

10% 2%

0% -3%

Jan-21

-4%

-11%

-4%

-5% -19%

-21% -40%

-1%

-6%

-2%

-34%

NSW

-4%

-5%

-1%

-5%

-21%

-22% -38%

-6%

VIC

-39% -54%

Traffic volume data from NSW and Victoria supports our position about the industry recovery. Sourced from inTelematics, it shows that vehicle usage in early 2021 has also returned to similar levels as the year before, maintaining consumer demand for aftermarket parts and services. Based on this, we can draw out some inferences about the future outlook for different parts of the sector, and the factors they should be considering as they plan for the future.

Servicing & Maintenance With private vehicle usage largely back to regular levels and an undiminished appetite for new cars, there are positive signs ahead for workshops. With the impact of COVID seeming to have receded in this space, concerns return to more ‘traditional’ challenges such as access to technology, sourcing skilled technicians, and the continuing threat of dealership servicing. Manufacturers & Retailers For parts manufacturers and retailers still riding the wave of DIY activity, the key question is the extent to which consumers may be pulling forward their purchasing decisions as a result of this unique travel situation. When overseas travel becomes an option again, will the market for products such as 4x4 modifications dry up?

Source: InTelematics *NSW covers 39 LGAs including Sydney, Central Coast, Newcastle, Wollongong, and portions of the South Coast. VIC covers 31 LGAs focused on Melbourne, Geelong, and the Mornington Peninsula Australian Automotive Aftermarket Association Dashboard. Presented by ACA Research. Copyright © 2021.

3. The 4WD Car Parc

4WD Car Parc

57% increase 700,000 more 4WD vehicles in vehicles 5 – 10 years old on Australian roads (vs. 2015)

4.8

5.5

million

4WD Vehicles in 2015

4WD Vehicles in 2020

63%

70%

of 4WD car parc 5+ yrs old

The 4WD car parc has seen steady growth since 2015, adding around 700,000 vehicles over this period. This reflects the changing trends in vehicle ownership, with the market increasingly shifting to utes and SUVs in recent times. While some of the vehicles in question will be heavily accessorised for off-road or camping use, many of them will be used more conventionally, with the 4WD functionality less critical to their core driving behaviours. Despite these varying usage patterns, all of these vehicles will require regular servicing and maintenance, particularly given the increasing age of the 4WD car parc. Focusing on vehicles that are more than five years old (and are therefore less likely to be taken to a dealership workshop) we can see that these have increased from three million vehicles in 2015 to 3.8 million in 2020. This growth is important, as these vehicles will have moved beyond OEM warranty periods, and into more significant service schedules. The specific needs will however vary significantly between a work ute and a luxury SUV, so workshops need to consider the needs of their local car parc, and ensure they have the tools and equipment needed to cater to their customer’s needs.

4WD Models by State Building on this point, we can see that the top 4WD models vary quite significantly by state. The caveat here is that Toyota (through the Hilux and Landcruiser) does dominate the market, but when we look beyond this, we can see that the level of urbanisation plays a key role in determining which 4WDs are favoured. For instance, we can see that the top models for NSW/ACT skew towards SUVs. This reflects the SUVs ability to cater to the broader needs of a family, while also giving the owners a practical option for their out-of-town adventures. This is important given NSW/ACT make up a third of the 4WD car parc, and will therefor have a considerable impact upon how it shapes out in the future. Conversely, most other states have a greater number of 4WDs (like the Nissan Navara and Ford Ranger). This will align to a certain extent with a greater proportion of residents living in regional or rural areas, but will also reflect different types of usage. Whatever the case may be, aftermarket players can monitor these patterns to ensure they are tailoring their offering to a relevant audience

SUVs

NSW/ACT

VIC

QLD

Toyota Hilux (158k)

Toyota Hilux (108k)

Toyota Hilux (59k)

Toyota Landcruiser (102k)

Ford Ranger (73k)

Toyota Landcruiser (70k)

Subaru Forester (79k)

Toyota Landcruiser (69k)

Mazda CX-5 (68k)

Toyota RAV4 (61k)

TAS

Toyota Hilux (33k)

Toyota Hilux (7k)

Toyota Hilux (11k)

Toyota Landcruiser (38k)

Toyota Landcruiser (21k)

Toyota Landcruiser (5k)

Subaru Forester (9k)

Nissan Navara (51k)

Ford Ranger (27k)

Ford Ranger (20k)

Toyota RAV4 (3k)

Toyota Landcruiser (8k)

Mazda CX-5 (51k)

Mazda CX-5 (45k)

Nissan Navara (26k)

Subaru Forester (16k)

Toyota Prado (3k)

Subaru Outback (6k)

Nissan Navara (50k)

Ford Ranger (44k)

Toyota RAV4 (24k)

Nissan Navara (14k)

Nissan Navara (2k)

Ford Ranger (6k)

European 4WD Brands Bearing in mind that SUVs are a part of the 4WD car parc, we should also recognise the strong performance by our Euro brands (Volkswagen, Audi and BMW). Off the back of a greater emphasis on their 4WD offering, their growth rates are outperforming a number of 4WD manufacturing giants like Toyota (10%), Subaru (11%), and Nissan (17%). While they are still working to somewhat smaller volumes (VW sits 9th in the 4WD car parc, with Audi 13th and BMW 14th), their performance highlights the importance of European brands in the Australian 4WD car parc. In line with their broader positioning, the European brands are succeeding by offering luxury SUVs – a different offering to our more traditional 4WD providers (although we do need to recognise that today’s Hilux is a far cry from the basic work trucks they used to be). Whilst these vehicles are typically not used for hardcore off-roading, they provide safe and comfortable access to road accessible holiday destinations, meeting the needs of the average city dweller. Ultimately, this growth is a great sign for Euro specialist workshops, and suppliers catering to their needs. While we are seeing some issues at the moment in terms of vehicle and parts availability, once these have been addresses it is likely that we will see the continued growth of European 4WD vehicles in the car parc.

145,780 Vehicles (↑51%)

99,810 Vehicles (↑38%)

94,769 Vehicles (↑36%)

TIGUAN

TOUAREG

71,726 Vehicles (↑72%)

18,111 Vehicles (↑33%)

AUDI Q5

AUDI Q7

28,678 Vehicles (↑52%)

20,129 Vehicles (↑59%)

BMW X5

BMW X3

49,378 Vehicles (↑17%)

26,258 Vehicles (↑32%)

4. Industry Headlines

Industry Headlines Stocks from the Aftermarket Industry Make a Strong Comeback The Australian automotive industry has been recovering extremely well after the pandemic restrictions eased, with companies like AP Eagers and ARB Corporation nearing 52-week highs this quarter. Structural change in the aftermarket industry’s competition is around the corner with the Federal Government introducing a new law in the coming months that will make it illegal for car companies to withhold information from qualified independent mechanics. This, in combination with automobile sales recovering, has meant a positive outlook for the automotive aftermarket industry.

ARB wins global Ford contract Ford Motor company has chosen ARB, and two other companies to provide aftermarket components for the Bronco. Ford has stated that they will collaborate with off-road aftermarket companies on a range of performance parts “beyond the current catalogue of Ford-approved accessories for the Bronco and Bronco Sport.”

Shell, in a Turning Point, Says Its Oil Production Has Peaked Europe’s largest oil and gas producer says that oil production will gradually decline 1 or 2 percent annually, from its peak in 2019. This has necessitated a shift to future clean-energy objectives by the company; many people however are skeptical that this is possible. Shell notes that whilst oil and gas will be needed for years to come, the pandemic served as a catalyst for more action in the attainment of a carbonless future (especially in Europe).

Morrison Government levels the playing field for independent repairers On 24 March 2021, the Morrison Government introduced legislation to establish a mandatory scheme for the sharing of motor vehicle service and repair information. The aim of this historic legislation is to create a level playing field for the automotive repair sector, increase consumer choice and ensure healthy competition. Minister Sukkar emphasised that automotive service and repair businesses importantly employ over 106,000 Australians and that the future requires a fair and competitive market to remain strong. This scheme will come into effect on 1 July 2022.

Bapcor Continues to Invest Heavily in Bricks and Mortar Bapcor, one of Australia’s and the Asia-Pacific’s largest aftermarket companies continues to invest significantly into Aus and NZ brick and mortar, with the opening of 45 new branches. Bapcor believes that a key factor in the company’s success is its geographic reach to customers across all sectors of its automotive aftermarket operations. Bapor’s CEO states that they are strong as they identify “key geographic locations that best meet the requirements of our vast customer base.”

MG becomes a top-10 brand in Australia Chinese owned MG entered the top 10 in sales by marque in February 2021 when it hit 8th spot (ahead of industry stalwarts Volkswagen and Mercedes). Growth in February saw MG rise 159% from February 2020 and a remarkable 2442% since its relaunch into the Australian market 2017. Other Chinese brands, such as LDV and Haval have seen similar levels of growth, and goes to show that Chinese vehicles are becoming a real player in the Australian market.

About AAAA

About ACA Research

The Australian Automotive Aftermarket Association, is the national industry association representing manufacturers, distributors, wholesalers, importers and retailers of automotive parts and accessories, tools and equipment, as well as providers of vehicle service, repair and modification services in Australia.

With over 20 years of automotive experience, ACA Research has developed a detailed understanding of the automotive sector, Using this market knowledge, we design and deliver research that helps our clients understand and overcome their business issues, empowering them to move forward with confidence.

For more information, please contact:

Lesley Yates

Ben Selwyn

Bayee Wang

Director of Government Relations and Advocacy Australian Automotive Aftermarket Association (AAAA) Convenor: Automotive Products Manufacturers & Exporters Council (APMEC)

Director ACA Research 0411 132 166 bselwyn@acaresearch.com.au

Account Manager ACA Research 9927 3347 bwang@acaresearch.com.au

7-8 Bastow Place Mulgrave VIC 3170 Australia +61 (3) 9545 3333 | 0402 005 476 lyates@aaaa.com.au

Level 6, 54 Miller St North Sydney NSW 2060 Australia +61 (2) 9927 3333