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New ABS data released today shows record falls of 37.8 per cent in the value of loan commitments for road vehicles in April.

“These figures reflect the plunge in new car sales that occurred in April but it also demonstrates the tighter credit environment for so many customers looking to purchase a car,” Australian Automotive Dealer Association CEO James Voortman said.

“The industry has experienced two of its worst months on record due to the effects of the pandemic and much of that is low consumer confidence but there is also a more systemic issue with access to credit brought on by the banking royal commission,” said Mr Voortman.

“People who would usually present no concerns to finance companies are getting denied credit to buy cars. We need to get credit flowing in this economy and review our responsible lending laws which have simply gone too far,” he said.

“We are hopeful that sales will pick up in June which is traditionally a strong month, but beyond that it is critical for our industry that credit is freed up to bring customers back to the showrooms,” he said.

New car sales have been falling for 26 months in a row and sales figures in April and May saw some of the biggest declines on record due to the effects of the COVID-19 pandemic.

New car Dealers are located in cities and country towns across Australia, where they employ around 60,000 people and are responsible for more than $55 billion in sales.

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The industry body representing new car Dealers has welcomed the extension of the expanded instant asset write-off until the end of the year.

“This is very welcome news for car Dealers and we hope that this will help our industry recover from the significant downturn we have experienced in new car sales,” AADA CEO James Voortman said.

“I would like to congratulate the Government on this announcement which will encourage businesses to invest during a time in which our economy will need it,” he said.

“I would urge eligible businesses looking to invest in a vehicle to do so before the end of the financial year as there are some very good deals to be had,” Mr Voortman said.

“While this is very welcome news, we will continue to call on the Government to remove the car limit of $57,581 which applies to the instant asset write-off. There is no justification for a car limit. There are no limits on other goods and we’ll be asking the Government to review this,” he said.

The AADA has been calling for the extension of the instant asset write-off along with a number of other measures to help the industry through this difficult time.

New car sales have been falling for 26 months in a row and sales figures in April and May saw some of the biggest declines on record due to the effects of the COVID-19 pandemic.

New car Dealers are located in cities and country towns across Australia, where they employ around 60,000 people and are responsible for more than $55 billion in sales.

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New car sales figures continue to plunge to record lows as the month of May represents the 26^th month of falling sales amid a significant credit crunch.

Less than 60,000 cars were sold in the month representing a fall of more than 35 per cent over the same period last year, the biggest decline in May on record.

“The effects of the pandemic has taken its toll on Australia’s Dealers, and these businesses in cities and regional towns across the country are doing it tough,” AADA CEO James Voortman said.

“Usually May and June are our best months as we head into the end of the financial year. All I can say is thank goodness for the JobKeeper program which has saved so many jobs during these tough times,” he said.

“The biggest issue constraining the recovery in our industry is access to credit for consumers. So many people who would usually present no concerns to finance companies are getting denied credit to buy new cars. We need to get credit flowing in this economy and review our responsible lending laws which have simply gone too far,” he said.

“It is now clear that the Government should consider a stimulus for the sale of new cars. So many other countries are currently providing consumers with incentives to buy new cars which are safer, cleaner and more efficient than the cars they replace on our roads,” he said.

“The effect of today’s figures and the broader 26-month downturn should not be underestimated. Passenger cars are Australia’s third biggest import; dealerships employ nearly 60,000 people and the wider automotive industry employs more than 300,000 people,” Mr Voortman said.

“New car Dealers are so important to local economies, through the employment they provide, the many local businesses they use as suppliers, the advertising they undertake in local news, the sporting teams they sponsor and the billions they contribute to tax for Federal and State Governments,” he said.

The AADA has developed a number of measures for the Government to consider to assist the automotive industry in its recovery.

 

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The industry body representing new car Dealers acknowledges new automotive franchising regulations but has urged the Government to move urgently to address unresolved issues which allow offshore car Manufacturers to squeeze local Dealers.

“These regulations which begin today are a good first step, but given recent developments with General Motors’ termination of 185 Holden Dealers, it is clear we have to go further,” AADA CEO James Voortman said.

“The real announcement today is the Government’s commitment to work towards developing an industry standard for compensation and also address the issue of tenure in Dealer Agreements,” he said.

“These are very important issues and they need to go beyond yet another roundtable and result in action,” he said.

“An industry standard for compensation must establish a fair and reasonable framework for those car Manufacturers who are looking to exit the country, rationalise their Dealer networks or change their distribution model,” he said.

“Dealers commit significant investments in capital, and many have formed decades-long partnerships with Manufacturers. They deserve fair and reasonable compensation when these agreements are ended prematurely and unexpectedly,” said Mr Voortman.

“It’s also important that we address security of tenure and consideration of a reasonable minimum term for Dealer Agreements, something the ACCC addressed in its 2017 market study,” he said.

“Taking on a new car franchise is an incredibly costly exercise and profit margins are very slim. Dealers deserve to be given agreements which are long enough to enable them to recover investments. Currently there are Dealers on one-year agreements which is just manifestly inadequate,” he said.

“It is important that the Government moves to put stronger protections in place as soon as possible. The industry is in a state of change and Manufacturers are actively considering changes to how they distribute products. They naturally have the right to do so, but it’s important that any changes are fair and transparent for affected Dealers,” said Mr Voortman.

“We need to encourage investment and to ensure that local car Dealers have the confidence to hire people and undertake the economic activity needed to support the many small and medium businesses that do work with car Dealers especially in those communities recovering from drought and bushfires as well as coronavirus,” he said.

New car Dealers are located in cities and country towns across Australia, where they employ around 60,000 people and are responsible for more than $55 billion in sales.

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The industry body representing new car Dealers has called on the Government to focus on renewing our vehicle fleet as new data shows the age of our fleet is falling further behind the rest of the world.

The ABS Motor Vehicle Census shows the average age of passenger vehicles has now reached double figures and is 10.1 years. The average age of light commercial vehicles also rose and now sits at 10.6 years.

“We need to work towards lowering the age of our cars and getting newer cars on our roads which are safer, cleaner and more efficient than the older cars they replace,” AADA CEO James Voortman said.

“This data shows that over the last five years both our passenger car and light commercial vehicle fleets have been getting older,” he said.

“Amid the pandemic, there is evidence that many people are nervous about using public transport and are considering purchasing a car. There is an opportunity for Government to help those people into a newer car and in the process support an industry which is struggling,” said Mr Voortman.

“The Government should design policies which assist in renewing the fleet. For example, the instant asset write off has helped, but can be made more effective. The scheme currently applies a limit of $57,581 on cars. There is no rationale for this limit and many businesses that may have taken advantage of this initiative have been left frustrated and confused,” he said.

“COVID-19 has also seen many consumers struggling to get credit as individuals utilising JobKeeper are being treated as high risk by credit providers and being denied credit. It is going to be difficult for this industry to recover if credit is frozen and there is an opportunity to provide a guarantee and exemption from responsible lending laws similar to that which has been provided to SMEs,” he said.

“Unfortunately governments, both federal and state have done very little to incentivise newer cars in recent years and taxes such as import tariffs, the luxury car tax and vehicle stamp duty have only inflated the prices of new cars,” said Mr Voortman.

“In other parts of the world governments are currently developing significant stimulus packages for their automotive industries in recognition of the sector’s economic importance, but also as a way of lowering the age of their vehicle fleets and achieving the associated benefits of a younger fleet,” he said.

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New car sales figures released for the month of April represent the lowest number of cars sold in a month in 26 years and the biggest monthly decline on record.

Less than 40,000 cars were sold in April representing a fall of 48.5 per cent over the same period last year and the biggest monthly contraction since new car sales figures were first recorded in 1991.

“Although we were expecting a very poor month, the extent of this decline in sales is still alarming,” AADA CEO James Voortman said.

“The COVID-19 related restrictions and associated economic anxiety have combined to send the sales of new vehicles off a cliff,” he said.

“The effect of these figures on the wider economy should not be underestimated. Passenger cars is Australia’s third biggest import; the industry contributes almost $13 billion to the economy; and dealerships employ nearly 60,000 jobs in cities and country towns across the nation,” Mr Voortman said.

“Outside of dealerships, new car sales support so many businesses ranging from those involved in shipping and distribution of cars, finance and insurance products, aftermarket accessories, servicing and repair, and many more,” he said.

“We are hopeful that April represents the bottom of this downturn, but it would be foolish to ignore some of the headwinds facing the economy and its vital that industry and governments start working together on considering ways to assist the recovery of this industry,” Mr Voortman said.

The AADA has developed a number of measures for the Government to consider to assist the automotive industry in its recovery.

“The $150,000 instant asset write-off should be extended beyond 30 June and the Government should remove the car limit that currently applies to this initiative. There is simply no rationale for treating cars differently to other assets,” Mr Voortman said.

“The Government should also consider ways to incentivise the renewal of our fleet, assisting the uptake of newer, safer and lower emitting cars,” he said.

“We need to address the tightening of credit brought on by the royal commission and compounded by the COVID-19 crisis. If credit is not freed up, this recovery will not happen,” he said.

“The various taxes applied on cars at the federal and state levels need to be urgently reviewed,” Mr Voortman said.

“Finally, the Government’s current work to provide a degree of balance between automotive Manufacturers and Dealers needs to ensure that Dealers are effectively protected in their future franchising relationships,” he said.

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New car sales figures released for the month of March are the worst monthly result in more than a decade but only serve as an indicator of the hardship Dealers will face in coming months.

“In March many Dealers were fulfilling orders placed in the previous month or earlier, meaning the figures don’t reveal the full extent of the impact of the corona virus,” AADA CEO James Voortman said.

“Dealers are reporting that consumer enquiry levels have dropped dramatically over the last three weeks while important fleet orders from rental car and tourism operators have dried up,” he said.

“With State and Federal Governments issuing advice strongly discouraging the public from leaving home and visiting Dealerships, showroom and workshop activity is severely restricted,” Mr Voortman said.

Given these factors, the AADA expects sales in April to contract even more significantly.

“New car Dealers across Australia have mostly managed to keep their doors open and service the needs of their customers, but the impact of the corona virus will push some Dealers over the edge,” Mr Voortman said.

“Unfortunately Dealers don’t qualify for many of the stimulus packages because of their high turnover and staff levels,” he said.

“Governments need to understand that new car Dealers operate on very low margins and turnover alone is not a metric that can be used to determine their survivability in such adverse trading conditions,” he said.

“What we are saying to governments is please talk to us when designing and delivering these packages,” he said.

“Dealers are big employers, pay large amounts of taxes and duties and operate as generous and upstanding corporate citizens in the communities they serve. Dealers have never asked for a handout before, but need all the help they can get now, if they are to survive,” Mr Voortman said.

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