New car sales plunge, but rate cut could spur market

The sharp economic slowdown led to a sharp slowdown in new car sales last month, but economists predict numbers could rise before the end of the year.

The sharp economic slowdown led to a sharp slowdown in new car sales last month, but economists predict numbers could rise before the end of the year.

Data from the Federal Chamber of Automotive Industries shows 77,324 cars, trucks and buses were sold in August, down by 12.3% from the same time last year. But year to date new vehicle sales are up 0.7% to 703,955.

FCAI chief executive Andrew McKellar says the numbers are to be excepted, given the current environment. “The August downturn reflects the broader slowdown in domestic demand, which is largely attributable to previous interest rate rises.

“Tuesday’s official interest rate cut is a welcome move and will help renew future confidence in the marketplace, but unfortunately the figures suggest it may have come too late and further reductions may be necessary.”

McKellar also attacked the Government’s luxury car tax, as sales of luxury vehicles plunged 19.3% in August.

“This unnecessary and unfair tax grab is continuing to have a damaging impact on the Australian car industry. It is economically irresponsible to persist with this measure in the current circumstances,” he says.

CommSec chief economist Craig James also says the figures are at the level he would expect, and are proof consumer spending is still at a low point.

“It’s just further proof the interest rate hikes earlier in the year, rising living prices, and fuel costs have all taken a toll,” he says. “The other thing during the months of July and August was the luxury car tax impact that did lead to a bringing forward of sales into June, stealing some momentum.

“It’s been a difficult last couple of months for the car industry. Not only has it had to contend with softer consumer spending, but also the luxury car tax,” he says.

But James argues it isn’t all doom and gloom for the industry, and he expects sales to pick up within the next few months to the end of the year.

“I think the rate cut, and the potential for another in November, will provide a boost to consumer confidence. Petrol prices have come down significantly, overnight prices fell even further hitting their lowest levels in five months. That all bodes well for motorists,” he says.

“Car affordability does remain good, wages have been rising, car prices have been flat or falling. That all provides incentive for motorists.”

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