Car sales continue to fall in Australia and around the world

Despite LMC Automotive’s “cautious optimism” for the global car market, Australia’s Federal Chamber of Automotive Industries (FCAI) has revealed new vehicle sales within Australia continued to remain sluggish in November.

The body recorded 84,708 sales for the month, which is a fall of 9.8% on November 2018.

On a year-to-year basis, new car sales in 2019 have dropped 8.2% on 2018 levels.

FCAI chief executive officer Tony Weber pointed out November was the 20th consecutive month of decreasing sales.

“It is a tough market – full stop,” he said.

He added the sluggish growth was despite Australia’s automotive industry providing enticements and implementing multiple strategies to incentivise sales.

Leading the drop in new car sales was the passenger vehicle segment which was down 21.3% on November 2018 levels with only 23,022 sold across the country.

SUV sales fared a little better recording 39,541 new vehicle purchases – a 1.1% dip on the same period last year.

Meanwhile, the light commercial vehicle segment declined 8.8% with its monthly sales of 19,065.

Mr Weber pointed out the situation presented a “bright side” for consumers.

“There has never been a better time to purchase a new vehicle.”

Industry under pressure worldwide

The sluggish growth in car sales hasn’t been confined to Australia.

In 2018, China experienced it first full-year contraction in decades for car sales.

Intelligence and forecasting body LMC predicts China’s vehicle sales will plunge 7.9% this year.

However, the body expects China’s vehicle sales will expand again next year by more than 2% to about 26.1 million units.

On a global level, LMC forecasts vehicle sales will drop 4.5% this year after a falling 0.7% last year.

Sluggish global car sales have been attributed to the ongoing trade feud between US President Donald Trump and China’s President Xi Jinping, which has led to sharply falling business confidence and ongoing uncertainty in the trade environment, particularly in the EU and US.

The increased tariffs on goods has also led to higher vehicle costs.

LMC said it was important to watch Western Europe and North America, with the forecaster anticipating EU car sales will stay flat, while the US and Canadian car markets decline “mildly”.

Major car manufacturers cull jobs

Even though German and Japanese vehicle brands haven’t been as heavily affected as those in China, Germany’s second-largest car manufacturer Daimler revealed it was slashing 10,000 jobs to pare back labour costs.

Meanwhile, the country’s largest automobile manufacturer Volkswagen (VW) reported its Audi division would be cutting 9,500 jobs, which equates to almost 10% of its workforce.

VW chief executive officer said the German car industry was undergoing a “far-reaching upheaval”. All up over the last three years, VW has culled 30,000 jobs.

Job losses haven’t been restricted to Germany’s automotive sector, which is estimated to have pared back 50,000 roles in total.

In the US and Canada, General Motors has cut 8,000 jobs and closed four factories.

Electric vehicles blamed

Some car manufacturers have blamed the advent of electric vehicles for falling car sales.

However, EV sales still only account for 5% or less of overall passenger vehicle sales.

Despite this small section, the EV market is growing with Bloomberg predicting a 12% increase in EV sales for 2019 to 2.2 million.

China’s EV sales are up 30% on the previous year, even though the country recorded its first downturn in EV purchases in its fourth quarter.

Light at the end of the tunnel?

LMC’s outlook for the global car industry is cautiously optimistic but the forecasting body did point out rising unemployment combined with slow wage growth could result in consumers scaling back purchases.

LMC managing director Pete Kelly explained “looming threats” in the form of a potential escalation to the trade war, and possible US tariffs on vehicles and parts from Japan and Europe could trigger a further pull back in consumer vehicle purchases in mature economies.

“Stricter carbon dioxide limits could also adversely affect EU sales in 2020,” he added.

LMC predicts 2020 will be the turning point for the light vehicle industry, with growth to return after a two-year downturn – driven by emerging markets including China.

The body forecasts global sales will expand slightly by 0.7% in 2020.

“Although the headlines, like business sentiment, have been rather negative, the slowdown in global sales has been concentrated in emerging markets and we think the worst is over,” LMC managing director Pete Kelly said.

“Mature markets, meanwhile, have hardly budged over the past couple of years.”

“Unless they start to wobble, overall sales should rise modestly,” Mr Kelly added.

LMC anticipates car sales in mature markets will dip 1% next year.