NEWS FLASH – THERE’S A RECESSION HAPPENING… BUT IT’S NOT THE ONE YOU KNOW ABOUT

Well before August VFACTS hit the cyber-net, it was obvious that we’d have to avert our eyes from last month’s scoresheet to avoid a bout of morbid depression. And the numbers didn’t let us down in that regard.

Of course the result went from bad to hideous because of the protracted Victorian lockdown. These draconian measures landed a massive blow to Dealers’ businesses and trashed the national numbers.

You have to go back to 1997 to find a lower August total, and that was a year that came in at a meagre 772 thousand sales – but more on August later.

Economists generally define a Recession (yes, that’s with a capital ‘R’) as two consecutive quarters of declining GDP. That’s just happened in Australia, thanks to COVID-19, although there were a few worrying signs before the virus crept into our lives.

One of those worrying signs was the slowdown in new car sales.

Now, while the 29 consecutive months of year-over-year new car sales decline is widely known in both Federal and State political and economic circles, maybe the table above isn’t.

Table 1

Table 1 (above) shows four automotive recessions that governments – State and Federal – don’t seem to care to do anything about.

Total quarterly sales of new cars declined consecutively in the 2nd and 3rd quarters of 2017, the 3rd and 4th quarters of 2018, the 3rd and 4th quarters of 2019 and the 1st and 2nd quarters of 2020.

Of course, there’s likely more to come since COVID-19 has its icy grip on us, probably through year end.

Kinda puts things into perspective, doesn’t it?

Looking at the August numbers in detail, a few things jump out.

First, grid positions are relatively unchanged. Toyota has pole with 20.4% share for the month and 21.8% for the year. They love it at Toyota when a plan comes together – which is always for them…

Mazda sits in second spot on 11.3% and the ‘Seoul-brothers’ Hyundai and Kia are equal third on 7.4% – a mere 4 units separated them last month.

Talk about sibling rivalry…

The second thing that jumps out is the names of the top five brands ranked by performance relative to the market. Since the overall market is down 20.4% on a year-over-year basis, any brand that is down less than 20.4% can theoretically be called a ‘winner’. But that does seem like blatant abuse of the English language. Still, as Einstein proved, everything is relative..

The list is [here].

Three of these could well be called ‘aspirer’ brands and those three are all Chinese. You could argue that they are selling smallish numbers and that’s true – but the value propositions seem strong.

Note to self: Consumer Economics 101: Consumers love value.

In what was a decidedly underwhelming month in a dreary economic landscape, some other honourable mentions include:

  • Sustained return to form from Volvo Cars this year, down just 448 units YTD
  • Mercedes-Benz Cars and Vans both beat the market decline handily
  • Other luxury/prestige brands Audi, BMW and Maserati did likewise
  • There were some spectacular conflagrations at the other end of the table, but good manners cause me to forbear mentioning these matters….

As we head into the sixth month of COVID-19, diversions from our virtual house-arrest become increasingly important. Finding great things to read or watch is now a vital life skill.

VFACTS is no help in that regard.

A friend (or someone I formerly thought of as a friend) recommend that I read Love in the Time of Cholera by Nobel prize winning author Gabriel Garcia Marquez. He thought it was an appropriate choice given our pandemic circumstances.

I recommend you don’t do that.

Perhaps the new Netflix series ‘Raised By Wolves’ starring our own Travis Fimmel might be more appropriate (he’s a household name in Echuca).
Directed by Ridley Scott … how bad can it be? Ahem…just watch it. At least it’s not called Eaten By Wolves.

There might be a risk of some of that come 2021…

This article was written by David Blackhall, Industry Consultant, Raglan Ridge Advisory.

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