New motor vehicle sales in Queensland in August were almost 9% lower than in August 2013, according to ABS data released yesterday. There are at least three contributing factors:
- persistently weak consumer confidence (see Consumer sentiment slumps as budget worries weigh),
- members of Generation Y having lower rates of car use and ownership than members of earlier generations at the same age (see the Urbanist on Why is Gen Y driving less?), partly because many of them live in the inner city, so they’re less likely to buy new cars as they start to earn money, and
- baby boomers retiring and economising.
Given the importance of demographic factors, it’s possible new car sales won’t rebound strongly when the economy eventually improves. With lower rates of car ownership, I expect we’ll see increased demand for public transport and apartments in the inner city, so perhaps all those apartment towers being built in inner city Brisbane will be needed after all.
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Another potential explanation for the declines in new car sales would be the contraction in fleet purchases (always new vehicles, unlike the other categories of users you have identified). Vehicle fleets represent about 7-8% of the total vehicle fleet in Australia, and a much higher proportion of new vehicle sales.
Businesses are rationalising fleets (including not replacing vehicles and holding onto them for longer). In addition, given the uncertainty in much of the higher end of the white collar employment market, many people are choosing not to take a novated lease as part of a salary package. They simply don’t want to take on the longer-term liability.
Yes, good points. Thanks, Jim.