Tight new car market

Press, 9 January 1986, Page 19

Tight new car market

BEHIND the WHEEL with

Peter Greenslade

Although it is probable that some time will elapse before the Post Office Motor Registration branch is in a position to state how many new cars it registered in 1985, the number is likely to be less than 82,000 in the view of Ford New Zealand’s sales and marketing director, Reyn Penny. If he is right it will mean, in effect, that new car sales in 1985 declined by about 14,000 when compared with 1984.

Penny described 1985 as extremely eventful and added that the Government’s motor industry plan had wrought significant changes. New car buyers had benefited from currency changes and the determination of manufacturers to lift their individual performances.

In forecasting that the motor industry would continue to be busy in 1986 and that prices would begin to move early in the year, Penny was only voicing the view of motor industry observers.

Inevitably, new car prices must rise because the New Zealand dollar has deteriorated against major currencies, such as the Japanese yen.

Although readers might tend to be sceptical about Penny’s warning that motorists would be mistaken to expect the pricing advantages of 1985 to carry through to 1986, it cannot be denied that, as the value of the New Zealand dollar drops, the price of cars, whether they be imported in completely-knocked-down or completely-built-up form,

must rise. Add to that higher labour costs which must follow the wage round and it follows that locally assembled car prices will resume an upward trend.

It seems that an era is ending during which the New Zealand motoring, public came to regard a new car as an investment — even though for most people who did all the sums, it hardly was. Newspaper classified advertising columns clearly indicate that a new car now starts to depreciate, not appreciate, from the moment it is bought and driven out of the showroom. Of course, there are some used cars that will sell for more than they cost, but they are few and far between. With interest rates climbing in the second half of 1985 and more than an element of uncertainty about the country’s economic future, it was not really surprising that there was not much wear on dealers’ showroom floors. Some dealers found themselves uncomfortably overstocked and, to keep their backers and bankers happy, resorted to incentives to move dust-gathering stock. Nearer to Christmas, the situation became even more confusing when Ford, about to introduce new Lasers and Telstars, adopted Australian end-of-model sales strategies and, in co-operation with its dealers, held New Zealand’s first significant old model clearance sale.

It was probably more than coincidental that Bill Hartigan, an Australian who made good waves for Ford

Australia, had taken over the managing directorship of Ford New Zealand from Joe Anton, a laid-back New Zealander who did so much for the Lower Hutt-based company, and who had been transferred to Taiwan. Old model clearances are very much a part of the Australian car marketing scene and circumstances were very much in Ford’s favour to introduce the strategy to the New Zealand market. In fact, if any local assembler or importer had a truly legitimate excuse for discounting when it did, the company had to be Ford. Certainly, were local assemblers and importers who advertised their goods at reduced prices, giving the strengthening New Zealand dollar as the reason. In most cases that reason could not have been the most valid because, although communications between New Zealand and the rest of the world are virtually instantaneous these days, the effects of deals involving currency, particularly when they apply to cars, take longer to seep through than the New Zealand dollar took to strengthen. In fact, a top man in local

assembly recently admitted that local assemblers and car importers, who had justified their reduced prices on the strength of the New Zealand dollar, had not been honest with the buying public.

The fact of the matter was that people in the industry, some of whom chose to buy licences to import completely-built-up cars in particular, misread the market and found themselves and their dealers

with stock that could not be moved at the going rates. To maintain a cash flow they just had to quit cars and some of the discounts were for significant amounts. They still are, but those people will have to reappraise their business procedures if they are to survive.

Some of them may go to the wall. That remains to be seen. On the face of it, there will probably be some new car bargains again this year, but in the main the bargain cars will not be of a type, or a price for that matter, that will appeal to most popular car buyers. Two things, however, do seem certain; the entrepreneurial element that tended to push up licence premiums under the tendering system has probably had its fingers burnt sufficiently to sit back and take stock, and local assemblers have revised their 1986 production targets into line with realistic market expectations over the next 12 months.

The way ahead is by no means clear, and although the Government says it is doing all it possibly can to present a clear and uncomplicated picture of the situation as it sees it after the introduction of the Goods and Services Tax in October, the electorate has yet to be convinced. Under the circumstances, it would probably be optimistic to expect the new car market to strengthen in 1986.