Market Insight: Strength in government numbers

AUSTRALIA’S public sector is playing a key role in supporting the soft new-vehicle market this year, with the latest figures revealing a significant increase in government sales as private, business and rental transactions were all down in August.

Government vehicle sales have been in positive territory every month this year as private and rental sales have ebbed and flowed and as business purchases have been stuck in a rut.

Sales to government departments and entities grew 4.1 per cent in August with 3589 units shifted, compared with 3449 in the same month last year.

Year to date, the growth is greater, with a 6.1 per cent boost to 27,973 units sold to the public sector, up from 26,370 in the first eight months of 2013.

While the government figures make up the smallest percentage of sales when compared with private, business and rental sales, the results highlight a shift in the market, with every other sector losing ground last month.

Private sales dropped 6.3 per cent in August when matched with the same month in 2013, while rental sales fell 2.5 per cent and business transactions were down by 6.6 per cent.

Year to date, the business sector continues to struggle, with an 8.2 per cent drop equating to 23,307 fewer sales than January-to-August last year, and it is the light commercial segment that is seeing the most obvious slowdown with an 11.4 per cent decline YTD.

Some of this can be attributed to the shift in the mining sector that has seen fewer mines constructed in recent years, while the federal government’s May budget has also had an impact.

The sharp drop-off in numbers in mining states and territories has had an effect on sales, with Western Australia dropping off by 10.2 per cent last month over the previous August, Queensland stalling with a 10.1 per cent slowdown and Northern Territory taking a significant 16.5 per cent hit.

Business sales are also down this year in the passenger car (-4.4 per cent) and SUV (-10.5 per cent) segments. The rental market is down in LCVs (-11.6 per cent) and passenger cars (-2.7 per cent), with SUVs the only positive story for this sector – up 1.9 per cent YTD.

For private buyers, which have played a key role in keeping the market on even ground this year, SUV and LCV sales are up 13.4 and 5.6 per cent respectively, but passenger cars are down 7.0 per cent after taking a 15.7 per cent hit last month alone.

There are positive returns in all key areas with government purchases, although public sector buyers are following the trend of private consumers by increasingly opting for SUVs over passenger cars, with sales of the high-riding wagons up a whopping 29.6 per cent last month to be 9.8 per cent ahead YTD.

That said, passenger car sales to government buyers remain strong, up 7.7 per cent YTD, while light commercials are up 1.5 per cent.

Despite the fluctuating numbers between the segments throughout the year, overall government sales have been up every month since January.

While passenger cars are still the biggest-selling segment in Australia, SUVs remain the fastest growing among government, rental and private buyers.

In a bid to support local car-makers, many government departments have policies that mandate Australian-made cars for their fleets, however this is expected to shift in the lead-up to the closure of all three manufacturer’s operations by 2017.

Sales of Australian-built cars dropped 23.9 per cent last month compared with August 2013, while YTD sales are down by 7.5 per cent.

Toyota’s Altona-built Camry – a favourite of many government fleets thanks to the hybrid variant which ticks the green box that a number of departments require – was down 26 per cent in monthly figures, while year to date it is 6.0 per cent behind the same period last year.

Ford’s Falcon continued to slide, and is now down 27.9 per cent so far this year, but Holden’s VF Commodore is in front by 32.8 per cent.

While it remains to be seen whether government sales will continue to grow in the third and fourth quarter, it is quite likely that public sector sales in 2014 will eclipse last year’s total of 40,747, which were down 20 per cent on 2012’s result.