New vehicle sales data for February showed a 7.9% decline over the corresponding month in 2024, while year-to-date volume is down 5.4% over last year’s record tally.
However it’s important to take a longer view: Last month was the second-best February tally on record, and the third-highest YTD tally to this point of the year. The market is cooling, meaning more inventory and increased probability of discounts, but volume in context remains high.
Arguably the headline angle, and the one many people are talking about, centres on the decline in sales of battery electric vehicles (EVs), including a 64% YTD fall from Tesla in the leadup to the launch of an updated Model Y.
EV sales were 44% down for the month and are 37% down for the year, with their February market share down to 6.1%, from nearly 10% in February 2024. This is despite the rapid rollout of customer choice, with nearly 100 EV models available.
While there’s clearly a challenge selling EVs to the mass market as opposed to tech-savvy early adopters, there’s a reasonable chance that some of that volume went to plug-in hybrids (PHEVs) instead, since tax exemptions on leased PHEVs end on March 31, promoting a rush.
PHEV sales spiked about 350% in February and are up more than 3x this year, with the new BYD Shark ute dominating the market alongside the same company’s Sealion 6 SUV. Regular Toyota-style hybrids meanwhile increased volume by 34.7%, as petrol-only cars declined 13% and diesels 16.1%.
We’re seeing some interesting patterns when it comes to the types of customers purchasing cars. Private sales declined a further 12% amidst cost-of-living headwinds, while business fleet sales were down ‘only’ 4%. Government sales fell 17.4%, with a federal election around the corner.
It’s not only the type of buyers that are noteworthy, but the types of vehicles being purchased. SUVs took 60.4% market share and light commercial vehicles 22.5%, while traditional passenger cars (hatches, sedans, wagons, MPVs, coupes) took an all-time low of just 13.5% mof the market in February.
A decade ago these sorts of cars accounted for roughly half the market, so the changing dynamic evident in the used market already will only become more of a factor: Namely, used Toyota Corollas, Mazda 3s, Hyundai i30s etc will carry inflated price indexes due to undersupply, relative to lingering used demand.
Mid-sized SUVs alone took 23.4% market share, meaning vehicles such as the RAV4, CX-5 and Outlander accounted for almost 1-in-4 cars sold. Any brand without a competitor in this market segment is therefore robbing itself of significant volume opportunities.
Reflecting the changing dynamic amid brands on offer, no fewer than five Chinese domestic nameplates finished February inside the top 20 overall list for the first time: GWM (7th), MG (8th), BYD (11th), Chery (14th) and LDV (20th). Chery and BYD were also the two fastest-growing brands.
If we sum up the Australian market right now we are seeing cooling sales as legacy backorders dry up and private buyer sentiment remains cool amidst high cost-of-living, coupled to rising inventory and increased competition from new entrants. A good recipe for buyers, but some potentially challenging times for dealers. Expect to see pressure resulting in the spectre of more concentrated ownership.
Longer-term issues to monitor include the looming Federal Election and its policy implications, the impact of further cash rate cuts on consumer sentiment as household mortgage payments come down, and progress on the New Vehicle Efficiency Standard (NVES).
Counted from July 1 this year, the NVES will begin to impose penalties on manufacturers with fleet-average CO2 emissions above a set threshold. Lagging EV uptake is causing concern amongst parts of the sector, and there’s already talk about whether to make tweaks.
Cox Automotive Australia forecasts a 4.5% decline in new vehicle sales this year, so we are currently roughly in line. We expect EV sales to increase again and get towards 10% share, as consumer sentiment shifts, PHEV tax breaks disappear, and customer choices increase further.
Two months down, 10 to go!
