AAAA Dashboard - Q4 2020 by aaaa710

DASHBOARD Q4 2020

The voice of the independent aftermarket in Australia Welcome to the Q4 2020 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

Year In Review

Australian Automotive Aftermarket Association Dashboard. Presented by ACA Research. Copyright ÂŠ 2021.

3. Looking To the Future

4. Industry Headlines

1. State of the Market

Australian Automotive Aftermarket Association Dashboard. Presented by ACA Research. Copyright ÂŠ 2021.

Australian Economic Indicators Consumer Confidence

108.2

Fuel Prices

Business Confidence (21)

Westpac Melbourne Institute (Q4’20, vs. Q3’20) Consumer confidence recovered significantly in Q4 2020, with December’s Index of 112 standing out as a ten-year high (last seen in October 2010). The strength of the Index in Q4 highlights the strength of consumer sentiment around recovery from the COVID-19 pandemic. This is a key difference to behaviour following the GFC, and suggests that Australia’s efforts to combat the pandemic are seen to have effectively set the country up as we move into 2021.

110.3

(26)

Roy Morgan (Q4’20, vs. Q3’20) Business confidence similarly saw a significant recovery in Q4, driven by Australia’s prompt and effective response to the COVID-19 pandemic. This was particularly evident in December, with business confidence jumping 14 points from November (although results will be watched closely following the Northern Beaches outbreak). Despite that setback, the return to a more ‘normal’ business environment is the catalyst for an improved 2021. Assuming further outbreaks are effectively managed, we can have a level of confidence about the year ahead.

$1.21

( 0c)

AiP - Ave weekly price (Q4’20, vs. Q3’20) Fuel prices in Q4 have largely remained consistent with their Q3 level, again reflecting an Australian economy that is returning to the status quo. While this was the case across the quarter, we did see some monthly fluctuations, with average fuel prices ranging between $1.18 and $1.29 over the quarter. This is reflective of a fuel price cycle that has normalised throughout the final quarter of 2020, and this stable fuel price cycle is likely to continue into 2021.

New Car Sales By Quarter We saw a significant recovery in new car sales in Q4 when compared to the rest of 2020, as the economy begins to recover from the impact of COVID. Looking to the future however, questions remain about whether Australians will continue to spend locally once international holidays are back on the table, or if this shift in purchasing patterns will persist over the longer term.

2020 sales volume in Q4

272,077

For now however, new car sales have bucked the trend for the better.

Year-on-Year change

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

+8%

Q3 2018

Q3 2019

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2020 5

New Car Sales By State Varying sales results across the country clearly show the impact of COVID-19 outbreaks (and lockdowns), with Victoria and Tasmania particularly weak. Despite the Avalon cluster, NSW recorded positive growth in Q4, with almost 90,000 new vehicles sold over the period. Despite this solid result, it remains well behind the stronger Northern and Western markets in WA, Queensland, and SA, which all recorded double-digit growth compared to Q4 2019. These results will be monitored through early 2021 to assess the potential impact of this recovery on the Australian aftermarket (i.e. the potential upside in part and accessory sales against the potential risk of increased dealer servicing).

State

Q4 Volume

% Chng (YoY)

Q4 Share

New South Wales

87,437

32%

Victoria

70,580

-4%

26%

Queensland

58,228

17%

21%

Western Australia

26,659

18%

10%

South Australia

17,468

13%

Australian Capital Territory

4,412

26%

Tasmania

4,984

-6%

Northern Territory

2,309

33%

272,077

TOTAL

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New Car Sales By Marque Q4 Rank

Toyota 66,179 vehicles sold

Make 2020

Q4 Volume

% Chng YoY

Q4 Share

Toyota

66,179

29%

24%

2 2

Mazda

25,066

35%

3 1

Hyundai

19,588

4 2

Ford

18,663

27%

5 2

Mitsubishi

16,378

-13%

6 1

Kia

15,380

Nissan

11,756

-4%

8 11

Isuzu

10,634

20%

9 1

Volkswagen

9,683

-21%

Subaru

9,507

TOTAL

272,077

+8%

At a brand level, we can see that seven of the Top 10 posted YoY sales increases, an encouraging and relieving end to an otherwise turbulent year. Volkswagen, Mitsubishi, and (to a lesser extent) Nissan were the outliers here, with results lagging 2019 performance, although in some cases (e.g. Volkswagen), logistical issues off the back of the pandemic impacted vehicle availability. Despite these challenges, Toyota (which was responsible for almost one in four vehicles sold during the quarter), Mazda (which overtook Hyundai and Mitsubushi as it moved into 2nd place), Ford (which jumped back up to 4th), and Isuzu (which jumped into the top ten off the back of strong D-Max sales), demonstrated that significant opportunities still exist for brands that can effectively tailor their range to changing consumer demands. Looking ahead to 2021, it will however be challenging to maintain these results, with a wide range of mass-market and premium SUVs and utes due to arrive in Australia over the next 12 months.

2. Year in Review

New Car Sales By Buyer Type 449,376

PRIVATE

478,625

367,932

BUSINESS

436,509

GOVERNMENT

30,417

34,676

73,702

2020

What might however be surprising is that the segment of the market least affected by the pandemic was private consumers (down 6% YoY). Despite federal and state governments providing support to the business sector (including a significant extension of the instant asset write-off scheme), they ended 2020 having purchased almost 70,000 vehicles less than the year before, with the consumer decline less than half that number. Key for the aftermarket here is that while fleets may not be buying new vehicles, they will still be needing to operate them. This suggests opportunities to support them as they either purchase used vehicles, or look to extend the life of their existing assets.

36,062

RENTAL

It will be no surprise that 2020 saw a significant decline in new car sales, with the global COVID-19 pandemic having a significant impact on personal and corporate expenditure.

2019

Vehicle Type

2020 Volume

% Chng from 2019

2020 Share

Private

449,376

↓6%

51%

Business

367,932

↓16%

42%

Government

30,417

↓16%

Rental

34,676

↓53%

New Car Sales By Fuel Type 527,871

PETROL

658,539

290,659

DIESEL

HYBRID

* EV

332,219

60,417

Despite Australian new vehicle sales figures almost universally trending down through 2020, one category stands out for its continued upward momentum. Hybrid and electric vehicles (led by Toyota’s highly successful RAV4) have seen significant growth in 2020, which is also notable given the lack of federal government support for alternative powertrains. The 2020 growth comes off the back of hybrid sales doubling between 2019 and 2020, demonstrating the growing community demand for lower emission vehicles. Looking to the future, a range of new electric and hybrid vehicles are due to land in Australia through 2021, which will increasingly align with the driving needs of a typical family (charging, range and size), and also continue progress towards the ultimate goal of cost parity with an internal combustion equivalent.

31,191

3,454 2,949

2020

Type

2020 Volume

% Chng from 2019

2020 Share

Petrol

527,871

↓19.8%

51%

Diesel

290,659

↓12.5%

42%

Hybrid

60,417

↑93.7%

3,454

↑17.12%

2019

*Tesla sales are not included in the Electric Vehicles category as they do not publicly report new car sales figures

New Car Sales By Brand 2020 also saw continued growth from some lesser-known brands in the Australian market, with Chinese-made vehicles from brands like MG, LDV, and Haval now accounting for 3.2% of new vehicles sold. In fact, Australians are buying more cars made in China than any other time in our automotive history. Despite the ongoing tensions between Australia and China, these brands are recognising the potential for growth in the Australian market, focusing on improving vehicle quality and maintaining their sharp pricing to deliver significant value to Australian consumers. While this growth is primarily achieved in SUVs, MG has also had success with its small car option, the MG3. MG is also pushing into alternative powertrains with its fully electrified ZS SUV available from $43,990 driveaway. Again, looking beyond SUVs, LDV’s appealing T60 ute is also performing well, becoming the 10th most popular ute in market through 2020.

15,253 Sales (↑83%)

3,294 Sales (↑93%)

9,323 Sales (↑44%)

MG MG3

HAVAL H2

LDV D90

7,158 Sales (↑78%)

1,988 Sales (↑117%)

715 Sales (↑171%)

MG ZS

HAVAL H6

LDV T60

5,494 Sales (↑47%)

957 Sales (↑101%)

5,581 Sales (↑58%)

3. Looking To The Future

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Business Revenue Recovery WHAT IMPACT HAS THE COVID-19 CRISIS HAD ON YOUR BUSINESS REVENUE?

65%

12th April

68%

26th April

73%

10th May

73%

24th May

78% 66%

7th June

68%

21st June

68%

5th July

19th July

71%

2nd Aug

68%

16th Aug

72%

30th Aug

67%

13th Sept

61%

27th Sept

68% 59%

11th Oct

25th Oct

63%

8th Nov

58%

54%

22nd Nov

6th Dec

(Insights from ACA Researchâ&#x20AC;&#x2122;s SMB Covid-19 Tracker 18th December 2020)

Last year was a challenging one for Australian businesses, with COVID-19 shutting down large sections of the economy. This was clearly evident in the ACA Research COVID-19 tracking research, with two thirds of SMBs reporting that revenues were down as recently as mid-October.

Move forward however to the last quarter of 2020, and we can see a significant level of recovery. At this point, almost half of SMBs had regained (or even exceeded) their previous income, suggesting the Australian economy is well-positioned for a strong year ahead in 2021.

Australian Automotive Aftermarket Association Dashboard. Presented by ACA Research. Copyright ÂŠ 2021.

This also has positive implications for the automotive sector. Off the back of this shift, we can expect a clear increase in km travelled, driving fleets to catch up on servicing or maintenance work that might have been deferred. Overall, this bodes well for the 2021 Australian aftermarket outlook.

Capital Expenditure Intentions

16%

15%

10%

of businesses surveyed intend to purchase light commercial vehicles within the next 3 months

of businesses surveyed intend to purchase passenger vehicles, including SUVs within the next 3 months

of businesses surveyed intend to purchase agricultural, construction, or earthmoving equipment within the next 3 months

(Insights from ACA Researchâ&#x20AC;&#x2122;s SMB Covid-19 Tracker 18th December 2020)

Australian Automotive Aftermarket Association Dashboard. Presented by ACA Research. Copyright ÂŠ 2021.

SMEs business confidence has recovered off the back of the recovery in revenue, which is then carried through into their spending behaviour. This is again evident in the ACA Research COVID-19 tracking results, with SMEs planning a level of capital expenditure across passenger and light commercial vehicles, as well as off-road equipment relating to construction or agriculture. While this will include a mix of new and used vehicles, it is again generally positive for the aftermarket. Growth in the overall business car parc will continue to present opportunities for part and accessory manufacturers and suppliers, while we also know that (despite the lure of new car warranties), the aftermarket will play a key role in delivering to any increases in servicing and maintenance needs.

Remote Working Trends WHAT PROPORTION OF YOUR STAFF ARE WORKING FROM HOME? Average % of staff working from home 52%

49%

50%

46%

All staff

38%

37%

36%

33%

Some staff

37%

36%

25%

26%

28%

32%

August

September

October

November

No staff

(Insights from ACA Research’s SMB Covid-19 Tracker 18th December 2020)

Despite the positive business sentiment, one change that automotive workshops will have to continue to factor into their planning is the slow pace with which employees are returning to the office. While the proportion of staff working from home is slowly declining, the reality is that this is likely to continue in some form well into the future.

For a workshop, this can be highly beneficial, with freedom from the office giving workers more flexibility when it comes to managing their ‘life admin’ and reducing the need for out of business hours or weekend servicing. On the flipside though, it could increase the demand for mobile servicing, if people are stuck at home as they jump between Zoom calls.

Moving forward, we will see more people returning to work for at least part of the week, increasing overall distances travelled. This will be further compounded by the fact that many are still avoiding public transport in favour of private vehicles. Both of these are positive indicators of increased demand for aftermarket products and services.

4. Industry Headlines

Australian Automotive Aftermarket Association Dashboard. Presented by ACA Research. Copyright ÂŠ 2021.

Industry Headlines Holden closure: ‘Weak’ franchise laws could see other brands leave Australia, dealer group warns With Holden now closing its doors in Australia – and after 31 months in a row of new-car sales decline – a Senate Inquiry in Canberra has been told current franchise laws make it too easy for multinational car companies to shut-up shop locally, wipe out jobs, and leave customers high and dry.

Australia Publishes Draft Right to Repair Legislation The Australia Treasury Department published an exposure draft of legislation for the mandatory motor vehicle service and repair information sharing scheme. The government is accepting public comments on the proposed law until January 31, 2021.

Futuristic Trade Trading A pilot digital, automotive skills high school program was implemented in late November. This program capitalises on the latest virtual reality technology to develop the skills of the newest generation of automotive apprentices. This presents a significant opportunity for the new generation of workshop owners to fast-track their development in a competitive industry.

Mandatory vehicle data-sharing law imminent New law is expected to compel car manufacturers to share all mechanical repair and service information with the independent auto repair sector on “fair and reasonable commercial terms”. The Australian Automotive Aftermarket Association (AAAA) has called the news a “landmark decision” that comes after 10 years of lobbying, while the Victorian Automobile Chamber of Commerce (VACC) called it “a big win”, and a “step in the right direction”. The Motor Trades Association of Australia (MTAA) also lauded the news.

Datium Insights: used car prices look to be softening The Datium Insights market update for the week ending October 12, 2020 shows that after six months of strong week-to-week increases, prices look to be softening. It says prices for the top 15 traded vehicles were largely negative with most vehicles seeing small declines.

Chinese brands MG, LDV, Haval and Great Wall posts record sales Australian car has seen an increase in the amount of Chinese made cars being bought. The major brands that have experienced growth in 2020 are MG, LDV and Haval. This represents a slow shift in the makeup of Australia’s car market that must be monitored by aftermarket stakeholders.

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 0403 776 767 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, 107 Mount St North Sydney NSW 2060 Australia +61 (2) 9927 3333

Australian Automotive Aftermarket Association Dashboard. Presented by ACA Research. Copyright ÂŠ 2021.