The rise of the ‘Baby’ SUV

NEW PROTECTIONS FOR FRANCHISEES

Amendments have been introduced to the Franchising Code of Conduct

The amendments have been designed to protect small and family businesses in the franchising sector. The purpose of the Competition and Consumer (Industry Codes—Franchising) Amendment (Fairness in Franchising) Regulations 2021 is to improve the fairness and transparency of the franchising sector.

Franchisees and prospective franchisees will benefit from: • improvements to pre-entry disclosure requirements including: - introduction of a new key facts sheet which must be completed by the franchisor and provided to prospective franchisees, along with other disclosure documents to help a franchisee to make an initial assessment about a franchise offer - an updated information statement that must be given to anyone who expresses interest in buying a franchise to help consider the risks and opportunities associated with franchising - improvements to the scope of financial disclosure, including requiring additional information relating to goodwill - more specific disclosure relating to supplier rebates. • extra dispute resolution options. • a longer cooling-off period of 14 days, and new cooling-off rights for transfers. • a prohibition on franchisors passing on certain legal costs. • a prohibition on franchisors retrospectively and unilaterally varying franchisee agreements. The Government has also committed to significantly increase penalties for breaches of the Code, and Legislation is currently before the parliament. For more information on the protection, visit www.accc.gov.au/business/industry-codes

THE RISE OF THE ‘BABY’ SUV

ACA Research explains that in 2020, for the first time in Australian automotive history, one in every two vehicles sold was a SUV

This is clearly a reflection of consumers’ desire for a versatile vehicle that can meet their travel needs across urban and rural environments. This represents a clear role reversal since 2012, when Passenger Vehicles accounted for half of new vehicle sales.

Whilst this is impressive, the strength of SUV sales is by no means a revelation for the Australian automotive industry. A trend that we have seen more recently though is the growing popularity of the ‘Baby’ SUV. While some of these models (for example, the Mazda CX-3) have been in market for a number of years, crossover SUVs have really burst out in popularity over the two years – going from ~5 percent of SUVs sold in January 2019 to more than 10 percent of the SUV market in June 2021. Bringing a unique value proposition that combines the best features of compact passenger vehicles and mid to large sized SUVs, a ‘Baby’ SUV affords customers the extra room, commanding view of the road and comfortable ride associated with a SUV, along with the lower price tag and reduced fuel intake of a small passenger car – the best of both worlds. We have seen the mid-sized SUV take over from sedans, and the Baby SUV now clearly seems to have its sights on the small car. Diving deeper into the category, growth is led by the Mazda CX-3 (with almost 9,000 sales in the first half of 2021), the Toyota Yaris Cross (with just over 4,000 sales YTD), Volkswagen T-Cross (with just over 3,500 sales YTD), the Kia Stonic (with just under 3,500), and the Hyundai Venue (just over 3,000 sales YTD). The performance of the Toyota Yaris Cross is particularly impressive, as it was only introduced into the market in late 2020 – its trajectory (along with the downward sales trend for the ‘traditional’ Yaris), suggest that it could be cannibalising share from its stablemate. What impact will the growth of this new category have on the existing market segments? To answer this question, it is useful to look at year-on-year sales for medium and large passenger vehicles as SUVs have become more popular.

Source: VFACTS

Source: VFACTS

There are only so many vehicles sold each year, and SUVs have clearly taken sales from medium passenger vehicles (down 63 percent since 2012) and large passenger vehicles (down 93 percent since 2012). Over time, we will see if the cost, drivability, and fuel economy of micro and light vehicles (for example, MG’s MG3) are enough to prevent the declines seen within the medium and large passenger segments. Historic results do however suggest that we are likely to see more growth in this emerging category, as OEMs launch more vehicles, and consumers take advantage of having these options available in market. This column was prepared for AAA Magazine by ACA Research, our partners in the AAAA Aftermarket Dashboard which is delivered to AAAA members each quarter. For more information, visit www.acaresearch.com.au or contact Ben Selwyn on bselwyn@acaresearch.com.au