Be mindful of economic pressures

Our economic situation is starting to put pressure on dealer activity. We’ve already seen some of the signs in more subdued market volumes in the early months of 2023. However, additional data is now at hand via Canstar NZ’s recent 2023 Consumer Pulse survey which provides more information on the situation.

Based on the 20,000 consumer responses the survey reports that 50 percent of respondents are now living payday to payday, and the cost of food and groceries is now the greatest concern for Kiwis – a quarter say it is their biggest worry (up from a comparatively low 11 percent in the same survey two years ago).

Over two-thirds of mortgage holders say they have or will cut back their overall spending due to the increased cost of mortgage repayments.

The average mortgage rate now sits at 6.7 percent, up from 2.63 percent two years ago.

Pressures

Dealers need to be mindful of these pressures. Recent weatherrelated sales aside, vehicle sales activity will continue to reflect the poorer economic conditions, and if dealers haven’t already done so they need look carefully at their business expenses to accommodate the expected tighter market conditions. Looking at industry specific issues, Government has signalled its intent to look at the Clean Car Discount scheme with possible adjustment of settings now expected. The scheme coffers are ‘upside down’ using industry speak, whereby the outgoings (as in payment of discounts) are substantial above the incomings (collections of fees). That is unpalatable because it was meant to be self-funding. We are waiting to see Government’s proposals, but tweaking the discount and fee settings seems likely. A reduction of discounts might be the most obvious play. On the flip side increasing fees might arguably be viewed as inflationary and therefore perhaps less likely. Time will tell.

Clean Car Standard

Moving over to the Clean Car Standard, most dealers will have now landed stock and experienced first-hand the CCS process and impacts. This includes the collection of fees and credits within their respective carbon accounts. Pay-as-you-go participants need to monitor those carbon account balances carefully and ensure they will be in a situation to meet any debt obligations (if required) when payments become due in June.

The Clean Car Upgrade scheme and social leasing scheme have been scrapped by Government. The tightening of financial conditions have put paid to aspirational ideas of that nature. Dealers outside of a few target trial locations were unlikely to have been impacted much anyway, so it won’t mean much for most in the industry.

Tony.everett@mta.org.nz

However, planning is progressing by Government towards a revision of light vehicle exhaust emissions entry standards. Assuming the proposals progress to wider consultation and implementation, it could mean a move for the used import sector towards Euro 5 or equivalent (currently Euro 4) as the required entry standard from as soon as 1 September 2023 – yes, later this year. New model new imports (not a mistake) will need to move to Euro 6D or equivalent from 1 February 2025, and existing new models a year later.

A recent Autofile article reported concerns from MIA that the proposed changes would put New Zealand ahead of those in Australia and therefore take New Zealand out of sync with its larger neighbour. Given upwards of 80 percent of our new vehicle mix currently mirrors that supplied to Australia, it could have some significant impact in the form of either higher pricing, reduced range and choice of new light vehicles able to be sold in New Zealand, or both. The position promoted by MIA is that New Zealand should follow Australia and not lead it. There will be more to report on this issue going forward.

As we head towards the next political election (October) we might have expected the flow of new policy ideas to ease, but it seems those aspirations might be a little premature. As they say, watch this space.

Registrations of 15,999 were down 24 percent on March 2022, which was a standout month leading into CCD as fee-attracting vehicles were advanced registered.

The market is down 19 percent across the first quarter of 2023 but comparable with the last five-year average. There were 11,628 new passenger vehicles, up 4 percent on March 2022 and down 2 percent YTD.

New commercials at 4,371 were down 56 percent on March last year, given the market at that time was spurred by the impending CCD introduction.

Model and brand performance

Top 15 models included: 10 SUVs, three utes and two cars.

Tucson, RAV4, Swift and Eclipse Cross have started the year strongly.

Toyota again claimed the market lead for March, and is already building a strong lead for the year so far. Product shortages continue, but to a lesser extent than previously. Across the first three months of the year many brands are behind the same point last year. Toyota, Hyundai, Kia and Suzuki are the only brands in the top 10 ahead. Outside the top 10 list, Skoda, Polestar, Cupra and Chevrolet are also doing better than same point last year.

DRIVE TECHNOLOGY MIX:

ICE 64

2,658 EV - 761 Tesla Model Y, 617 BYD ATT0 3, 307 MG ZS, 177 Kia EV6, 147 Polestar 2.

2,566 Hybrid - including: 455 RAV4, 245 Jazz, 211 Swift, 195 C-HR and 154 Yaris.

516 PHEV - including: 176 Eclipse Cross, 131 Sorento, 31 MG HS, 25 Niro and 18 Lexus NX.

1 FCEV - Hyundai

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