Prestige cars get Covid boost amid declining new vehicle sales

Luxury car brands fared better than the weakening broader Australian car market last month when the COVID-19 pandemic contributed to a 50 per cent drop in new-car sales compared to the same time last year.

Australia’s peak automotive representative body says the 48.5 per cent fall in April represents the largest ever monthly decline in new-car sales since VFACTS figures were first recorded in 1991.The Federal Chamber of Automotive Industries (FCAI) says 38,926 new-car sales were recorded in April, representing a fall of 48.5 per cent over the same period last year (75,550 sales).

‘The greatest rival to people buying a European car is a European holiday, and as people are putting those holidays off, they’re more prepared to buy a car.’

Still, the Australian market is holding up well compared to its European counterparts. The Financial Times has reported that the UK automotive industry is expected to announce an April sales decline of 97 per cent, with similar falls in Spain and Italy.

Back home, things look even better again at the luxury end of the market.Among the prestige marques, BMW led the charge with its monthly sales down just 5 per cent. Ferrari was off the monthly pace by 18 per cent but was the only fancy carmaker ahead on its year-to-date trajectory (up 4 per cent), while Maserati recorded a 27 per cent slump in its April sales performance.

It seems some corona virus side-effects have been behind the uptick in luxury car sales.The general manager of a large Melbourne prestige car dealership, who asked not to be named due to “sensitivity issues”, says “closing ratios” have naturally been higher as there have been fewer inquiries, but those who have visited his dealership have been solid buyers.

One such buyer, who worked in alcohol importation, had pivoted to create an in-demand line of hand sanitizers after which he bought two high-end SUV models directly off the showroom floor.

The Federal Government’s COVID-induced $150,000 instant asset write-off tax incentive for small business may have assisted in that situation.However, the new restrictions around international travel may also have left families unexpectedly cashed up.

One man who would have a pretty good fix on that is Bobby Zagame (pictured above), managing director of the Zagame Automotive Group, which owns and runs more than a dozen dealerships in Melbourne and Adelaide, including most of the high-end marques like Ferrari, Aston Martin and Rolls-Royce Motor Cars.

Many in his customer base would have been adversely affected by the corona virus fallout, but he’s been surprised by how many have also done well.”There’s always someone doing well in disadvantaged times and there’s more of those now than we would have thought,” Zagame says.But any propensity to spend would be limited to what they are able to spend that money on now, he says, and a car is becoming an increasingly useful thing to have in these times, even if it’s just to park it in the garage so you can look at it and enjoy it.

“At the top end, some people would usually blow pretty big numbers on an overseas holiday, which they won’t now be able to enjoy for a good 18 months,” he says.Ongoing restrictions across various transport options makes it probable that cars will become a more important discretionary spend in people’s lives.

“I don’t know about you, but a lot of people are probably thinking it might be nice to pack the car and go off to a beach or country destination for a break or just for a change of scenery,” he says.The Melbourne general manager agrees that “the greatest rival to people buying a European car is a European holiday”.”And the data we’re seeing from head office [in Europe] is showing that, as people are putting those holidays off, they’re more prepared to buy a car,” he says.

Stronger finance campaigns from car dealerships, including loyalty bonuses, have also seen existing customers, perhaps a few years into a car lease, prepared to refinance into a new vehicle without extra cost or risk exposure.

Zagame says he’s also seen a rise in “opportunistic buying” among those “thinking they can do a better deal now than they could do in better times, which they can”.In the overall new-car market, passenger vehicles were hardest hit, according to VFACTS – off 61.6 per cent on April last year – while sports utility vehicle sales were down 45.7 per cent for the period.

Across the country, Victoria saw the largest fall in sales for the month (down 53.3 per cent), followed by NSW and South Australia (both -50.5 per cent) and Tasmania (-50.2 per cent).The year-to-date sales figures for April of 272,287 represented a 20.9 per cent decline from the 344,088 vehicles sold in 2019.

FCAI chief executive Tony Weber says COVID-19 had clearly been a major influence on the April sales result, reflecting a downturn in the broader Australian economy.“Figures recently released by the Australian Bureau of Statistics show that 31 per cent of Australian citizens have experienced a decrease in income due to the pandemic,” Weber says.

“In addition, 72 per cent of Australian businesses reported that reduced cash flow is expected to have an adverse impact on business over the next two months.“These conditions inevitably impact consumer confidence and purchase decisions.”

This comes at a time when the Australian new-vehicle market has already been under stress for some time on the back of ongoing environmental, economic and political factors, along with tight credit lending restrictions.April’s was the 25th consecutive month of declining sales on a year-on-year basis (April 2020 compared to April 2019).