New car annual sales experienced a significant drop compared to a year earlier, an analysis of car sales found, shifting bargaining power away from dealers and towards buyers keen on snapping up a bargain.
However, one nascent category bucked the trend by trebling sales and solidifying its promise.
Car sales slumped by 20 per cent in the year ending July 2020, the analysts at IBISWorld said, continuing a 28 month streak of year-on-year losses and burning a 23 per cent revenue hole in the pockets of carmakers.
And carmakers stand to lose more money over the next year, the analysts said, as the drastic change in lifestyles spurred by the COVID-19 pandemic has resulted in people relying less on cars.
IBISWorld forecasts a drop of 4.3 per cent in revenue for the 2020 to 2021 year. This is owed to work from home arrangements undermining the traditional need to drive to an office, people forgoing spending in lieu of saving, and a rise in unemployment placing expensive car purchases out of reach for many.
The bargaining window may close
The drop in new car sales is forecast to be temporary, IBISWorld said -- eventually eliminating a window when customers would be able to negotiate prices from a stronger bargaining position.
Sales are expected to normalise as restrictions begin to lift during the COVID-19 pandemic, the analysts said. Customers are then expected to return to showrooms with a “pent-up demand”.
The lift in demand may mean carmakers and dealers might be less likely to offer discounts or throw in optional extras.
There’s an emerging car category bucking the trend
Electric vehicle sales fended off the downturn petrol and diesel cars couldn’t thanks to new models being introduced, IBISWorld said, but adoption in Australia still trails the progress of other developed countries.
The hybridised marriage of battery technology with a combustion engine helped the category treble its sales in 2019. Toyota’s Rav4, for instance, was the top selling vehicle in July this year -- and half of all models sold were a petrol-hybrid, Ibisworld said.
But Australia has not taken to the nascent category with the same warmth as other countries. Electric vehicles only accounted for 0.6 per cent of new car sales in 2019, when their sales accounted for 2.5 to 5 per cent in developed countries.
“Australia lacks a formalised national target for electric vehicle adoption,” the analysts said in a note.
“In the absence of greater incentives, the uptake of electric vehicles in Australia is likely to continue to be slow.”
The findings were consistent with an annual report released earlier this month by the Electric Vehicle Council.
The demand for cars driven by electric motors and powered by rechargeable batteries is anticipated to increase, IBISWorld said, particularly as less expensive and more diverse models enter the market.
Lenders may reward people who buy a green car
Saving on fuel is not the only attractive perk of buying an economical, hybrid or electric vehicle. The car loans needed to purchase them may be cheaper too.
Some lenders offer green car loans that have lower interest rates than regular car loans. Others encourage the purchase of environmentally friendly cars by waiving fees or redraw charges.
Not every lender offers a green car loan as they’re relatively new to the Australian personal lending market. Take a look at the table below to see if a green car loan could suit your needs.