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July VFACTS: Luxury tax stalls new car market

High Beem: The BMW 3 Series was one of the cars to take a hit in July.

Impending tax increase causes the Australian car market to stagger

5 Aug 2008

LUXURY car importers endured an expected bloodbath in July as the controversial – and still to be confirmed – increase in the luxury car tax had a devastating affect on the new-vehicle market, causing sales to drop for only the second time in 19 months.

According to official VFACTS figures released today by the Federal Chamber of Automotive Industries (FCAI), sales of cars over the LCT threshold of $57,123 dropped by one-third in July compared with June.

While the tax increase will not be ratified by parliament until the end of this month at the earliest, the government has said it will be backdated to July 1, so customers were taking no risks and clearly pulled forward their purchases to June.

Sales of many familiar luxury cars slumped heavily, including the BMW 3 Series (down from 670 in June to 340 in July), BMW 1 Series Coupe/Convertible (235 to 133), BMW 3 Series Coupe/Convertible (347 to 204), Mercedes-Benz S-class (51 to 16), Mercedes-Benz SLK (80 to 44), Saab 9-3 Convertible (54 to 18), Porsche Cayman (19 to 6), Nissan Patrol (436 to 256), Toyota LandCruiser (1132 to 712), BMW X5 (497 to 268), Range Rover Sport (188 to 66), Lexus LX (45 to 12) and Lexus RX (226 to 118).

Aston Martin took the biggest hit, selling only four cars for the month compared with 25 in June and 13 in July 2007, but the pain was also felt by more humble brands.

FCAI chief executive Andrew McKellar said that sales of “so-called luxury cars” fell overall by 33 per cent in July compared to the previous month and again criticised the government over the increase.

“The proposed tax hike has had a devastating impact on new-car sales,” said Mr McKellar. “It is clear that the downturn has been exacerbated by the impact of this unfair tax hike, and the industry has significant concerns that orders will continue to be affected in coming months.

“If this situation continues, the government will not receive the additional revenue it had projected, and there is a real risk that it will cost jobs.

“In these circumstances, one would have to question why the government would pursue this tax increase.”

106 center image Top to bottom: Toyota Landcruiser, Aston Martin V8 Vantage,Toyota Aurion, Lexus RX350. The heavy fall in sales over the LCT threshold affected the entire local market, making July only the second time in 19 months not to record a year-on-year increase.

July sales not only dropped by 21.2 per cent (22,565 sales) compared with June – a not altogether unexpected result for the first month of a new financial year – but they were also down by 2.7 per cent (2315 sales) on July 2007.

Nevertheless, the market remains 2.6 per cent up year-to-date and is still on track for another record result by the end of the year.

Toyota once more dominated the sales charts with 24.4 per cent of the 83,976 vehicles sold in July. About the only bad news for Toyota was a big drop for the locally produced Aurion.

Locally manufactured product accounted for almost the entire July loss compared to last year, down 2010 vehicles while imports dropped only 305. However, the news was better when compared to June, with local cars down only 1520 while imports dropped 21,045.

The ‘Big Three’ all gained market share in July, with Holden grabbing 13.3 per cent on the back of some heavy retail action and Ford 11.3 per cent thanks to improved results from Falcon, Focus and Ranger.

Despite losses in almost every market segment against the same month last year, Australia’s almost irrational love affair with big SUVs continues in the face of high fuel prices, with medium SUV sales up 8.1 per cent and large SUVs up by 7.4 per cent.

The latter was due entirely due to the recently launched LandCruiser 200 series, which sold 712 units in July – an increase of some 57.2 per cent on last year but still well down on the 1132 sales in June – while the rival Nissan Patrol dropped 40.3 per cent to only 256 sales (down from 436 in June).

Medium SUVs were led by the Toyota Prado, which comfortably beat the Ford Territory (1404 to 1028) while the Toyota Kluger had a relatively poor July with 970 sales (compared to its usual 1200-plus this year).

Compared with a month earlier, though, even the SUV segments suffered from the luxury tax bite, medium sales dropping from 7563 units to 5869 and large from 1603 to just 984.

If you thought that buyers would turn to compact SUVs to reduce fuel costs, think again. Even though many of these models fall below the LCT, sales dropped from 9936 in June to just 6496 in July, which was down 12.6 per cent on the same month last year.

Subaru’s Forester was again the compact SUV winner with 1226 sales (an amazing 44.7 up on last year), ahead of the Toyota RAV4 (down 4.7 per cent to 1114), Nissan X-Trail (down 12.5 per cent to 839) and Mitsubishi Outlander (down 9.9 per cent to 599).

However, the biggest loser was the Honda CR-V, which finished third in June with 1261 sales but fell to only 583 in July, 52.8 per cent down on the same month last year.

In the passenger-car market, the only segment to increase was Light, which increased by just 1.0 per cent while Small (down 3.1 per cent), Medium (down 2.4 per cent) and Large (down 9.7 per cent) underlined how Australia’s buying preferences are changing.

In terms of buyer type, it seems that business confidence is riding high (up 14.5 per cent) while private purchases are down some 15.0 per cent.

And businesses are buying more diesel cars, with sales more than doubling in the course of a year. Though that still represents only about one sale for every 13 petrol cars, in SUVs that ratio is now less that two to one while in Light Commercial Vehicles diesels outsold petrol by two to one.

Government fleet purchases were off again in July (down 2.5 per cent), but for some reason they are buying a lot of SUVs (up 34.6 per cent).

Toyota comfortably won the Light, Small and Medium segments with Yaris, Corolla and Camry while Holden’s 60th Anniversary Commodore value pack kept the long-term market leader well on top in the diminishing Large battle.

Yaris finished with 2401 to easily beat the Hyundai Getz and the rampant Mazda2, while Camry scored 1912 sales to beat the new Honda Accord Euro, which saw off the Mazda6 (894 to 772).

Corolla outsold the HiLux this month to be the second-biggest badge of the month behind Commodore, recording a whopping 4476 sales to comfortably beat the Mazda3 (2839), Holden Astra (1488), Mitsubishi Lancer (1395), Ford Focus (1243), VW Golf (1065), Honda Civic (1007) and Hyundai i30 (937) in the competitive but surprisingly shrinking Small segment.

While Commodore defied the industry trend by increasing its sales over June (up 632 units), Ford’s new FG Falcon held ground with 3448 sales – though that will still include some of the superseded model.

Toyota’s Aurion had a poor month dropping 28.5 per cent over last year to 1376, and that looks even worse alongside the June figure of 2552 (which we understand was inflated by an internal employee sales program).

Most of the other market segments were heavily distorted to greater or lesser degrees by the effects of the luxury car tax.

Notable increases were recorded by Audi (which managed to increase sales by 21.6 per cent over July 2007) and Nissan (up 14.4 per cent), while the big losers were Honda (which dropped a massive 36.7 per cent) and Lexus (down 33.4 per cent, but at least able to blame the LCT).

Top 10 brands in July:
Rank Make Sales % Share
1 Toyota 20,521 24.4%
2 Holden 11,148 13.3%
3 Ford 9464 11.3%
4 Mazda 6508 7.7%
5 Nissan 5261 6.3%
6 Mitsubishi 4277 5.1%
7 Hyundai 3759 4.5%
8 Honda 3566 4.2%
9 Subaru 2816 3.4%
10 Volkswagen 2634 3.1%

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