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Market Insight: Holden hopes rise with VF sales

Holden sales: VF Commodore sales were strong in October, but are still well down over 2012.

Buyer appetite for Holden Commodore improves but industry future far from certain

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Market Insight logo8 Nov 2013

THE strong sales result of Holden’s VF Commodore in October materialised this week amid new studies both in favour of, and against, ongoing support for Australian motor vehicle manufacturing and intense speculation about the level of commitment within federal cabinet for continuing to build cars here.

The 3315 new registrations last month recorded by the Federal Chamber of Automotive Industries’ VFACTS reporting service marked a 35 per cent increase for Commodore over the corresponding month last year, reducing the large sedan and wagon range’s year-to-date sales decline to 14 per cent with two months of trading left in the year.

At the midway point of the year, Commodore was down 35 per cent YTD compared to the first six months of 2012.

The positive result for the VF passenger car range last month papered over the substantial cracks in the chart of Holden’s homegrown vehicle sales this year, underpinning a 10 per cent increase for its Adelaide-built stable as a whole for October but still leaving the lion brand’s local car sales down 20 per cent overall this year – the deepest decline of all three Australian car-makers.

Sales of the niche long-wheelbase WN Caprice have also improved with the new model range – up 97 per cent last month on 183 units, but down 31 per cent for the year thus far – and the VF Ute clawed back into positive territory in October, up 3.2 per cent for the month (615 units) to stem a severe downturn that currently stands at 28 per cent this year.

That was enough for Holden to highlight its return to form, with company saying it “proves there is still a big appetite for Australian cars among Australian buyers”.

Of particular concern for the car-maker, however, will be the ongoing lacklustre sales performance of the volume-selling Cruze small car, which was down 15 per cent last month (1923 units) for a 16 per cent fall YTD.

Cruze is clinging on to a 10 per cent market share in Australia’s biggest market segment, but remains well shy of the more popular imported Toyota Corolla (17 per cent share), Mazda3 (16.5) and Hyundai i30 (12).

Holden’s 47,112 year-to-date sales of its locally manufactured vehicles compares to the more export-dependent Toyota’s 24,137 – down 12 per cent YTD after a worrying 34 per cent freefall last month (its Camry stalwart plunged 33 per cent) – and the virtually no-export Ford’s 23,616-unit tally so far this year, which is 19 per cent in arrears.

Toyota’s Camry and Aurion sedans are now down 7.6 and 23.8 per cent respectively this year, while Ford will be contemplating a further 30 per cent decline in Falcon sedan sales, a 21 per cent fall for the Falcon utility and a 7.3 per cent negative shift for the Territory SUV – the three of which are in line for an upgrade next year and a complete withdrawal from the market two years later.

All up, less than 100,000 new Aussie-made cars have been registered this year – the official total stands at 94,865 – which represents a 17.6 per cent downturn in an overall new-vehicle market that is 2.6 per cent ahead and on track to set yet another record, surpassing last year’s 1.112 million.

Last year, Australian cars’ influence on the overall market fell to 12.5 per cent. So far this year, the industry is accounting for just 10 per cent of all new registrations, and could slide below this mark come December 31 – a position that would further the cause of those inside federal cabinet (and out) who are resisting further taxpayer subsidies to the ailing sector.

There will be detailed inside knowledge within Canberra’s corridors of power about the future models Holden intends to build in Australia from 2016-17, if it wins enough support from the reluctant Abbott government.

A redesigned Cruze and Commodore are both in progress, but current local sales trends and limited export opportunities are sure to be weighing heavily on the minds of the decision-makers.

A widely anticipated switch to a front-drive platform for the large car – likely seeing an end to the utility and long-wheelbase sedan – could drive volume down further. On the other hand, would a smaller, more efficient new Commodore turn things around to such an extent that it vindicated the investment required from both Detroit and Canberra? As GoAuto has reported, a detailed study released by the FCAI this week puts the negative impact on the Australian economy of a car industry shutdown (calculated to 2031) at $21.5 billion, far in excess of the amount of industry assistance that would be provided over that time period.

This is a persuasive argument for ongoing, if not increased, taxpayer funding.

But crucial decisions are also still to be made – or made known – in the US and Japan.

Ford says government funding did not, in the end, determine in its decision to pull up stumps in 2016. Australia’s increasingly fragmented new-vehicle market figured more heavily.

Toyota says it needs to cut around $3800 from the cost of every car it builds in Australia if it is to survive here beyond 2018. Part of this will hinge on taxpayer support, while savings will also be sought in other areas, such as labour.

For Holden, which sorely needs major new export contracts and posted a $153 million loss last year on the back of continued sales declines for Commodore and Cruze, we’re left to contemplate how much downward pressure on domestic sales of its locally built cars the company and its supply chain – not to mention the governments supporting them – can withstand.

And how much sales growth is necessary to help guarantee its manufacturing future out to 2022, which is as far as GM is currently prepared to go?

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