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jJuly Fallback After Bumper June

In June vehicle sales in Australia stunned the analysts and the World’s economists by soaring 36.3 percent over the May figures, and posting the third biggest sales month ever.
This was in total contrast to the dismal results recorded by most of the World’s leading economies.

The Government put this unique performance down to their “carefully targeted investment packages”. By this they meant the 30 percent big business tax break, and the recently announced 50 percent tax break for small business (under $2mil annual turnover).

However, as expected, volumes have fallen back in the latest July figures as the 30 percent big business tax break expired on June 30th, but, remember, the small business 50percent tax incentive continues through to the end of the calender year.

So how do we see the last two roller coaster months as an imprint on future sales trends?

If we put the last two months together then the figures look very promising, but probably somewhat misleading as we believe the July figures stood up better than expected due to stock shortages experienced from the ‘panic buying’ in June..

In the rest of the World things are not so buoyant.

In the North American market General Motors will shortly be emerging from Chapter 11 Bankruptcy as a much leaner operation after dispensing with its under-performing operations, including its European brands, Saab, Opel and Vauxhall (though the Vauxhall/Opel deal still has to be finalised).

It will then be faced with the most difficult North American market conditions it could imagine, though admittedly it has had a boost from President Obama’s “Cash for Clunkers” initiative, where the initial $1bn budget has already been exhausted.

The House of Representatives was quick to allocate a further $2bn to this programme to ensure that the new car dealers keep a smile on their faces, but when that runs out sales will certainly fall back sharply.

European producers are already having to deal with massive sales vacuums and looming losses, with little hope of immediate recovery.

Even the Japanese and Korean car makers, including the World’s largest car maker, Toyota, are posting their first – and substantial – losses in their history.

One bright spot is the performance of Hyundai in Australia where sales of the small/medium saloon, the i30, and their 4WD’s are showing buoyant sales figures.Hyundai is the only major manufacturer to be showing a year-on-year increase to date on 2008 in Australia

The Hyundai management in Seoul must be wondering how they can emulate this in their other markets.

The usual measures that are taken in dire times are cuts to research and development budgets, cuts to sales and marketing expenditure and a ‘battening down of the hatches’ until the good times return.

Locally the retail trade is afresh with glory from the June and July sales, but, as much of this was orders being pulled forward, we can expect a tough fight for the sales dollar in the coming months, even with the 50 percent tax incentive still active.

So what will happen when this bonus runs out at the end of the year?

Well, that’s crystal ball territory. If the World economy hasn’t shown decent signs of recovery then vehicle sales will still be languishing, and Australia, without its special incentives, can be expected to join them.

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