6th January, 2020 ยท Media Release

AADA Calls on Regulators to Stamp Out
False Reporting of Car Sales

Key facts:

  • U.S. regulator Securities and Exchange Commission (SEC) clamps down on false reporting practices, Australia should follow suit.
  • Fake sales reporting can adversely impact consumers by eating into new car warranties.
  • Fake sales reporting undermines the credibility of data relied upon to assess Australia’s economic health.

 

The Australian Automotive Dealer Association (AADA) has urged regulators to stamp out the practice of falsely reporting vehicle sales figures, potentially harming consumers, investors and Dealers while distorting key data that is relied upon across the economy.

International regulators are waking up to the problem and have started to target car Manufacturers which report exaggerated and false sales figures. Last week it was reported that the U.S. Securities and Exchange Commission (SEC) opened an investigation into BMW, while in September Fiat Chrysler agreed to pay the SEC $40 million over claims it inflated sales figures.

“The practice of reporting false new car sales figures has been highlighted recently in the United States and it is a practice that has been endemic in Australia for some time,” said AADA CEO James Voortman.

“It potentially leaves consumers vulnerable regarding the start time of their warranty; it misleads investors by overstating the health of the Australian automotive industry; and it puts the squeeze on Dealers who are currently experiencing some of the most challenging market conditions in decades,” said Mr Voortman.

“It is high time that ASIC follows the lead of regulators in the United States, and comes down hard on those Manufacturers which push fake sales numbers and in doing so artificially inflate their reported market share,” he said.

Mr Voortman welcomed moves by Australian car Manufacturers to improve their sales reporting practices and commends FCAI on its work to continually improve the integrity of the VFACTs data, but has called on the industry to take swift action or risk the regulator forcing compliance through harsh financial penalties.

“Requiring a vehicle to be registered before it is sold is an important step, but it is only a first step and the whole industry should be working together to ensure that cars are only reported as sold when a genuine customer takes delivery of the car,” he said.

“It’s an open secret in the industry that a number of major Manufacturers set incredibly aggressive sales targets placing immense pressure on their Dealers to achieve these targets by reporting cars as sold, despite there being no end customer,” said Mr Voortman.

“Dealers are compelled to comply with Manufacturer directives as they fear being denied important incentive payments or even worse losing their franchise agreement. Many Dealers have been left with a backlog of unsold stock which is difficult to clear in a profitable manner,” he said.

“These practices also undermine the credibility of new car sales numbers reported through the VFACTs product, which is used by investors, economists and the Government in assessing the health of the industry and the broader economy and then making key decisions off the back of that information,” he said.

“In recent years some Manufacturers in Australia have focused solely on sales volumes which has led to questionable reporting practices and severely constrained the profitability of Dealers. Today we see the twenty-first consecutive month in which new car sales have contracted – surely now is the time to bring the focus back to profitability to ensure a sustainable future for the industry,” said Mr Voortman.

How does fudging automotive sales data impact you?

  • It can leave consumers vulnerable regarding the start time of their warranty.
  • Purchasing a new vehicle is the second largest investment a household makes (after buying a home) and is therefore a key indicator of consumer confidence and Australia’s economic health.
  • By falsely inflating data that is relied upon by Governments, institutions and investors, it can influence important decisions related to the economy such as interest rates that impact all households.

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