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NZ vehicle sales continue to strengthen on economic optimism

NZ vehicle sales continue to strengthen on economic optimism, more sales to tradies and farmers

By Sophie Boot

Oct. 11 (BusinessDesk) - Local vehicle sales are continuing to reach record highs, despite expectations for a slowdown during the election and post-election uncertainty, with cheap credit and economic confidence buoying the market.

Sales data from the Motor Industry Association last week showed motor vehicle registrations in the first nine months of this year are 10 percent ahead of the same period last year at 118,256, suggesting vehicle sales may be heading for a fourth straight annual record this year as the economy is buoyed by low interest rates and record migration.

MIA chief executive David Crawford said the ongoing buying was a bit of a pleasant surprise and has been encouraged by the current environment.

"There's strong net immigration, the New Zealand dollar on the stronger end so price is competitive, and pricing between distributors is competitive," Crawford said. "People have got confidence the economy is heading in the right direction. When the cost of finance is as low as it is now, you find people don't top up their mortgages to buy a car, they just buy it on finance because the cost of finance is cheap."

Listed vehicle seller Colonial Motor Company has been reaping the benefits of the continued boom, lifting annual profit 4.2 percent to $22 million in its latest financial year on a 14 percent gain in sales volumes, which chair Jim Gibbons put down to the combination of factors including low interest rates, a strong exchange rate, new technologies stimulating new vehicle sales, and upbeat consumer confidence bolstering the outlook for both light and heavy vehicles. The NZX-listed shares hit a record $7.98 a day after the MIA figures were released and recently traded at $7.70.

Similarly, Motor Trade Finance saw underlying earnings rise 7.6 percent to $23.6 million in the year to March 31 on a 36 percent revenue gain. The auto-lender put the strong result down to the buoyant economy and record vehicle sales while noting the car finance market remained very competitive.

"The motor vehicle industry has been experiencing record new and used vehicle sales and, with a 5.9 percent increase in the first quarter of 2017, show no immediate signs of slowing," MTF said.

MIA's Crawford said the industry has been seeing a "slight shift in vehicle type preferences", with a migration to small- and medium-size SUVs along with light commercial vehicles such as one-tonne utes.

"That reflects, too, the strength of the trades - tradies are buying the vans and the utes - and the farming community," Crawford said. "When the economy is robust, and there are forward orders, they're confident about replacing their vehicle stocks."

On a three- to six-month rolling average, sales of luxury brands appeared to be softer in 2017 from the year prior. Luxury vehicle sales tend to be a lead indicator of how business is viewing the economy, with sales of luxury car brands beginning to dip in 2008, followed by sales across the industry falling later that year and in 2009 as the global financial crisis took hold, Crawford said. However, he noted that this could be a case of substitution to SUVs, which the industry didn't see in 2008 and 2009.



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