Australia is squaring up to losing its car manufacturing industry. Ford pulls out in 2016, followed by Toyota and GM in 2017, bringing an end to Australian-built Holden models, arguably the motor manufacturer that many Australians have identified with. It’s not quite the end though. The truck industry is still active in the country with four manufacturers represented.

Volvo Trucks has an assembly plant at Wacol in Queensland and also owns the US Mack Trucks brand, popular in the country, Kenworth, part of the US PACCAR truck maker, builds vehicles in Australia and Iveco also produces trucks in the country.

Australian Jac Nasser, former Ford boss had warned before Ford announced its decision that if any of the three decided to quit, the other two would follow, as the supplier base for the industry would not be viable. In March, the Australian Government reinstated €340.4m in State funding to ensure that the industry can continue until 2017. The funding should benefit suppliers too.

China-Australia Deal

Import operations will continue for all three manufacturers but the signing of the China-Australia free trade agreement last year could open up the market to Chinese manufacturers. Under the agreement, the 5% tariff levied on Chinese manufactured products will be phased out, in return for a similar relaxation of import duties on Australian manufactured exports and commodities.

Australia appears to enjoy thriving vehicle sales at the moment, even though the economy is beginning to slow down after 23 years of consecutive growth. Data from the Federal Chamber of Automotive Industries (FCAI) shows that in June, sales reached 125,850 vehicles, 6.4% up on June 2014. June sales were up 0.4% on May. SUVs saw the highest growth with 42,256 sales, which were 14.7% higher than in June 2014. Passenger cars rose 4.7% to 56,386, while light CVs fell 33.1% to 23,758.

Business car sales rising

FCAI chief executive Tony Weber commented, “In June 2015, we have seen new car sales to business increase 10.5%. Specifically, business buyers purchased 20.8% more SUVs, 9.1% more passenger cars and 3.4% more light commercial vehicles.

“Sales to private buyers rose 3.7% and sales to government buyers rose 3.5%.”

For the January to June year to date (YtD), total sales reached 578,427, 3.3% higher than the same period in 2014. Total 2014 sales stood at 1,113,224, 2% down on 2013.

Part of the current story is discounting, which propelled the Hyundai i30 to become the best-selling car in Australia in June, with a price reduced by around €4,765 for many models, putting the i30 ahead of the 2014 best seller, the Toyota Corolla, and Mazda3. Over 5,500 i30s were sold, compared with 4,150 Toyota Corollas and 4,130 Mazda3s, with the Corolla in the lead so far this year, according to the news.com.au website. The website says that three ‘Utes’ – pickup trucks were in the top 10 best selling cars for June, with the Toyota HiLux the second best seller overall after the i30. The other utes to feature were the Mitsubishi Triton and Ford Ranger in fifth and sixth places respectively.

SUV sales growing fast

As LeasePlan points out, the Australian love affair with the V8 and large saloons has slipped away into history. The market that was dominated by the Holden Commodore, Ford Falcon and Toyota Camry has given way to smaller cars and the rise of the SUV – arguably well suited to Australia’s mix of tarmac and unpaved roads. SUV sales were up 13.8% YtD compared with 2014.

For these reasons, LeasePlan does not expect the decline of the Australian car industry to have a dramatic impact on the business car sector, with one exception, “Where there may be an impact is in Government or public fleets, where there may have been a policy that required purchasing of locally made vehicles. These fleets will need to adjust their future fleet composition considerations and review their fleet policies,” reckons LeasePlan.

The company reckons that currently 55% of new car sales are retail, 37% are business, but the figure is in decline, while Government business accounts for 4% and rental companies 4%.

As Tony Weber of FCAI indicated, business car users are asking for a broader range of cars. According to LeasePlan, “The business fleet tends to mirror private buyer trends. There is a decrease in appetite for the large, six-cylinder sedans, and an increase in demand for smaller cars, as well as SUVs and Light Commercials. Small cars dominate the passenger car segment and SUV sales are up 13% YtD (June) compared to 2014.”

As we have seen, Australians have been big buyers of ‘Utes’ for decades, while the SUV sector is also growing in popularity. LeasePlan says that SUVs and light commercials accounted for almost 50% of new car sales in 2014, with SUVs accounting for around 32% of sales and LCVs 17%. 4×4 twin or dual cab ‘Utes’ dominate the Light Commercial segment and as we have seen three out of the top five best sellers in June were ‘Utes’.

Business and private cars attract the same levels of taxation in Australia, but business vehicles are treated differently as a business operating cost.

LeasePlan has identified several trends in the fleet management sector, “Fleet management providers need to deliver increasing efficiencies and innovations to satisfy a demanding customer base.

“With a slowing economy, the focus sharpens on cost controls and additional services that will improve fleet operations.

“The responsibilities of the employer to provide a safe workplace also results in growing expectations of fleet providers to assist with risk management services, and deploy new technologies such as telematics to monitor and report on driver and vehicle behaviour.

“Providing system support for more pool car and car sharing within fleets is also important.

“Maintaining a competitive cost base while delivering these expanding services is a challenge for any Australian fleet provider.”