How is COVID-19 affecting the automotive sector?

man standing crossed arms wearing mask in a car dealership

As Covid-19 continues to play a role in the closure of businesses across the country, the automotive industry has found itself in quite a unique situation. 

Car dealerships have consistently experienced record declines in new car sales, well before the COVID-19 pandemic. In particular, May 2020 was the 27th month in a row of year-on-year decline. Perhaps surprisingly though, the Australian Automotive Industry has recently experienced a monumental shift in our car buying behaviour. As the nation awoke from the lockdowns, and the Federal Government introduced economic stimulus packages, June recorded the strongest monthly sales in over a year. 

Economic stimulus driving new car sales

The largest contributor to this growth was the boosted $150,000 Instant Asset Write Off. This increased write-off granted small business owners and tradies more freedom to make good asset investments. A large percentage of those investments have involved the purchase of new commercial vehicles. Although this scheme was extended to the end of 2020, most car dealers sold out of utes and vans before EOFY, sparking the beginning of new car stock shortages. 

The additional stimulus packages, including Job Keeper and Job Seeker, also supported the surge in new car sales. The combination of boosted cash flow and travel restrictions allowed individuals to invest money back into their own living needs. The money normally spent on an annual overseas holiday now used for home renovations and buying a car. 

With this additional disposable income, people are buying bigger and more expensive cars, such as luxury, SUV and 4×4, which they may never have imagined buying. While the increase in sales has been welcome news for the car industry, the unexpected escalation now faces the reality of causing severe stock shortages.

Increased demand for new car stock

The global impact of COVID-19 has seen car manufacturers temporarily holding production, cutting off the supply of new cars to the Australian market. This means the escalation in new car purchases is clearing out dealerships and leaving them scrambling to find sufficient stock. With the demand for cars high and the supply chain dry, it is the perfect storm. 

Due to the level 4 lockdown restrictions in Victoria, dealerships have managed to transport much-needed stock into Queensland and New South Wales, and are diverting entire shiploads away from Victoria. This support, however, is only a short term solution, with “industry insiders forecasting it will still take up to three months for supply to return to normal”. For now, buyers are moving toward purchasing near-new and used cars to fill their immediate needs. 

Looking to buy a car? 

Although new car stock may be harder to find it is still possible. With our dealer network across Australia, we are able to help you find the car you are looking for and have it delivered to your door. Let the team at Car Search Brokers take the hassle out of buying a car. Talk to us today!

Posted on September 14, 2020 in Blog