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News - Market Insight - Market Insight 2011

Supply shortage could affect vehicle prices – Glass’s

Supply shortfall: Suzuki Auto Co (SAC), the independent Suzuki distributor for Queensland and Northern NSW, could lose up to 400 vehicles from April production.

Tighter supplies caused by Japanese quake could increase vehicle transaction prices

Market Insight logo4 Apr 2011

By HAITHAM RAZAGUI and MARTON PETTENDY

RESTRICTED supplies of vehicles following the Japanese earthquake of March 11 are likely to cause average transaction prices to increase for some models, says Australian automotive industry data specialist EurotaxGlass’s.

Glass’s Australian national sales and marketing manager Nick Adamidis told GoAuto that while he doubted there would be significant spikes in manufacturer’s list prices, dealers will be offering fewer discounts on their fast-sellers.

He also said that tighter supplies could provide some automotive companies with “a bit of a respite” when it comes to slower selling models, for which they “won’t have to give factory discounts to move”.

In terms of used car prices, Mr Adamidis said that demand – and prices – could increase slightly if buyers find themselves pushed towards demonstrator, nearly-new or used vehicles because they are unable to source the brand-new car they want and/or are unwilling or unable to wait for factory supply to resume.

He said that some private buyers might be willing to hold off on purchasing until the situation is resolved but pointed out the situation facing those tied into lease agreements that are about to expire – although he said they may be able to extend those contracts for a year.

What could happen is a shift in preference towards vehicles that can be sourced quickly, thanks to the influential fleet sector, which consistently purchases more than half the vehicles sold in Australia each year.

Mr Adamidis said that fleets will be less willing to wait than private buyers because they try to turn their vehicles over at a consistent rate. For this reason and that of expediency, fleets are likely to substitute their usual choice of vehicle with the nearest equivalent alternative.

“Cars for which there is plenty of stock, (fleets) will move into that and just substitute. With tool of the trade type cars, it’s like a commodity and they’ll buy them off whoever can supply,” he said.

This could result in a shake-up of the sales charts, with results skewed due to the effects of the earthquake and resulting tsunami and nuclear radiation scare.

Suzuki Auto Co (SAC), the independent Suzuki distributor for Queensland and Northern NSW, told GoAuto it will receive 90 fewer vehicles than it ordered from the car-maker’s production schedule in March, and that it could lose up to 400 vehicles from April production.

“There is no guarantee for April,” said SAC general manager Adam Le Fevre. “Those lost orders have now been pushed out to May production, which won’t arrive here until June.” Mr Le Fevre said Suzuki has sold out of the previous-generation Swift in Queensland and was fortunate to currently have sufficient stock holdings of the new model, which was launched nationally in February.

But he said the greatest impact of the Japanese disaster would be felt by the brand’s volume-selling Swift just as the market enters the busiest part of the sales year, while tighter vehicle supplies are likely to affect many Japanese vehicle importers given the automotive industry’s ‘just in time’ policy of building to order.

“The aim is to maintain and improve the profitability of the network and everyone is mindful of the costs involved in holding stock, and this comes at a particularly difficult time of the year.

“We’re a wholesale company, so everything we do is predicated on the number of cars we get to sell. Suzuki has about 140 suppliers and initially after the quake could only contact about 60 of them – they simply can’t get components to build the cars.

“There are a whole lot of unknown factors that will affect an already difficult situation,” said Mr Le Fevre.

Another factor that is likely to cause change in the new vehicle market this year is the arrival of Holden’s locally-built Cruze and its hatchback variant later this year.

“Local production will probably shorten the supply time, meaning people will be able to get the exact specification car they want from Adelaide far sooner than they could have from South Korea, which will be an advantage as well,” said Mr Adamidis.

He agreed that the Cruze provides an alternative for fleets that have a requirement of purchasing only Australian-made products.

In addition to the private buyers that may prefer the hatchback’s practicality and shape, Mr Adamidis said that the Cruze hatch will “definitely open doors” for Holden to grab sales from fleets that have a preference for hatchback, wagon or small SUV body styles.

He said that Holden’s decision to hold prices for the entry-level Australian-built Cruze was “very clever” and will also help the model’s resale value.

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