‘Positive future’ for car industry

THE Australian car industry is bracing for its lowest annual sales result in two decades due to the deepening coronavirus pandemic but the head of its peak representative body remains confident of a relatively quick turnaround once a vaccine becomes available and consumer confidence returns.

In an interview with GoAuto last week, ahead of Melbourne’s move to tighter restrictions that will lead to car showroom closures, Federal Chamber of Automotive Industries (FCAI) chief executive Tony Weber said there was no way of accurately forecasting sales across the second half of the year as the health crisis continues in Australia, meaning the 20 per cent downturn recorded in the first half might continue to worsen.

Even a 25 per cent fall that many car company executives were anticipating – and now looks to be a conservative estimate given the situation in Victoria – would send the Australian new-vehicle market below 800,000 units for the first time since 2001, from a peak of 1.19 million in 2017 and 1.06 million last year.

But Mr Weber emphasised “there is a positive future” and that a return to longer-term growth that has eluded the industry every month for more than two years was expected based on the underlying structure of the economy and specific issues being addressed like consumer access to finance.

There are caveats, of course, such as more catastrophic floods, bushfires and drought.

But the Canberra-based industry chief who represents more than 40 car brands in Australia said the fundamentals were good, that market saturation was not apparent given strong population growth in recent years, and that government stimulus measures specifically targeting the auto sector – subsidies to boost sales of electric cars, for example – would be welcome but were not essential.

The top priority is to push the federal government to ease the current stringent lending practices introduced in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

“The most important thing that the government can do for this industry is get the right regulatory balance around the financing of vehicles,” Mr Weber said.

“We accept the recommendations, and support the thrust of the recommendations, coming out of the banking royal commission.

“But we need a balanced approach that protects consumers, but also promotes growth and sales in the market and that is the most important thing at the moment – and it was prior to COVID – that needs to be addressed in terms of the vehicle market.”

And is he confident it will be?

“The answer to that is yes because I know that people within government, senior people within government, understand this and think it is also an important issue,” he said.

“This is not about the industry itself. This is about the economic health of the nation. Access to finance is just absolutely fundamental to the health of the economy.”

Health is the topic dominating all conversations at every level across the nation, and for the car industry Mr Weber said any market turnaround in the second half of this year and into 2021 naturally hinged on the how the COVID-19 crisis plays out.

“When we entered the health crisis, the fundamental economic infrastructure in this country and the market conditions were good. So the first question that needs to be answered is: What is going to happen with the health crisis?” he said.

“There are multiple scenarios in my mind. One scenario is we go into great decline in terms of the infection rate. One is we hold steady. The best outcome is we get a vaccine. Those three scenarios have very different outcomes to them.

“Australian governments have responded very well relative to other countries in the world, and part of the consequence of that has been the decline in the market. (But) where we go to from here also reflects the fact that we still have a health crisis that needs to be addressed. 

“It’s hard to know where things will go.”

Mr Weber said consumer confidence was fundamental to Australia’s economic recovery and the car industry was no different to others in that once a vaccine becomes available “you then have a look at the underlying structure of the economy and consumer sentiment”.

“There’s a lot of issues that underly this,” he said.

“If we address these issues reasonably quickly, the underlying issues – if we don’t have another drought, we don’t have major bushfires, we don’t have all these things – the industry can turn around quickly is my gut feel.

“The fundamentals in Australia are good. Competition remains strong in the marketplace. I think the issues around market credit appear to be being addressed, although it’s hard to see in the current environment because it’s overshadowed by the health crisis.

“But the issues around financing that emanated out of the royal commission will work their way through the system and you leave yourself with the scenario of: There is a positive future there.

“And hence the road to recovery.”

The industry has supported the federal government’s economic measures during the pandemic, most notably the instant asset write-off which Mr Weber said was “obviously a substantial benefit to the market; we want to see that retained”.

But on the question of whether there should be specific programs in place for automotive industry as seen overseas, particularly targeting low-emissions and safer vehicles with taxpayer-funded scrappage schemes and subsidies, the FCAI chief said it would be a matter of ongoing dialogue with Canberra.

This feeds into the FCAI’s industry-led approach to reducing vehicle emissions, as demonstrated by the recent announcement of its own voluntary CO2 standard that looks for at least a 30 per cent reduction in new-vehicle emissions by 2030.

Asked if it was a ‘go-it-alone’ scenario for the industry, Mr Weber said: “I think that comment is unfair … Clearly there are moves to provide incentives, especially around their fleet (purchasing policies), that certain governments are looking at.”

He also refuted the suggestion that the market was at saturation point and the record 1.189 million sales set in 2017 was unlikely to be surpassed.

Since then, industry sales subsequently fell three and eight per cent in 2018 and ’19 respectively before COVID-19 sent it spiralling downward this year.

“Population growth in Australia has been strong in recent years,” he said.

“I think that we certainly aren’t at the point of saturation because as the Australian population continues to grow, and as Australians ultimately come back to a period of economic growth and wealth enhancement, the desire for vehicles will remain and will grow in line with those factors.”