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Australians might not have bought a record number of new cars last year after all -- the 1.136 million result has been called into question after a conspicuously sharp drop in the first two months of this year.
Official sales figures for February released today show the market has slowed dramatically -- by 3.8 per cent -- after a record finish to 2014.
There are rampant accusations across the industry that a number of mainstream brands counted thousands of cars as “sold” in order to meet internal sales targets -- even though the cars never actually left dealerships or holding yards.
“The market is completely out of control, cars are being jammed into dealers when there aren’t any customers for them, the sales figures are absolutely not a true reflection of what’s happening out there,” said a senior car industry source and veteran of the trade.
The practice of counting unsold cars has become so rife most brands have their own nickname for it: “cyber cars” because they are sold only in cyberspace, or “called cars” meaning they have been counted as sold by the dealer but yet to be sold to a customer.
Some dealers keen to snap up generous manufacturer bonuses for buying in bulk often get caught with the cars for months before they are sold to an actual customer.
The car sale is not counted twice but it means the official VFACTS figures may not accurately reflect the number of cars sold in a given month, say concerned industry insiders.
The phantom cars are also marketed as “undriven demonstrators”, meaning that the warranty period has started even though the car is yet to be registered.
An extensive mystery-shopper survey of new-car dealerships by News Corp Australia last month found a number of dealers offered significant discounts on brand-new cars if we were prepared to lose the first few months of the new-car warranty.
“We have reported the car as sold in order to get our monthly bonus, that’s why we can sell this car cheaper,” said one Parramatta Road dealer of a Top 10 brand, who supplied both prices on the back of his business card. “If you want a new car without the warranty started, the full warranty, it will cost more.”
The revelations cast doubt over the bonafides of last year’s record result of 1,136,227 car sales. Some executives believe the market was inflated by as much as 10 per cent, or more than 100,000 sales.
The car industry autonomously collects and publishes the information -- each car brand supplies their own figures, which do not need to be verified -- because it would take months to extract the data from the registration authorities in each state and territory.
The chief executive of the Federal Chamber of Automotive Industries, Tony Weber, insists the official sales figures are an accurate reflection of market conditions and denies the practice of counting unsold cars is widespread.
“We had a record year last year and we’ve seen a drop in the first two months of this year,” said Mr Weber. “I believe the slowing of the market has got to do with nervousness in the economy.”
Some of the mainstream brands that have posted conspicuous drops in sales in the first two months of this year include Nissan (down 43 per cent), Honda (down 33 per cent) and Mitsubishi (down 15 per cent).
Industry insiders say some brands are suffering a “hangover” after pushing too many cars into dealerships last year. There are claims that one popular brand (that typically sells less than 6000 cars a month) has 22,000 cars in holding yards across Australia and a further 8000 unsold cars in dealer stock.
“They’re full, and they’re now trying to digest all the cars they just bought. It’s going to take some of them months to clear and get back on track,” said the senior car company executive.
The oversupply of new cars means buyers will continue to have the upper hand as long as the competition is slashing prices.
Hefty discounting by the overstocked brands has forced other Top 10 contenders to lower their profit margins.
“Most dealers have all but given up making money on the car itself, the margins are so low, they make their profit in the deal on the finance,” said the industry veteran.
Figures for February showed 86,818 new vehicles were reported as sold, down 3.8 per cent for the same month last year.
The Mazda3 was the top-selling car for the second month in a row, extending its year-to-date lead over last year’s reigning champ, the Toyota Corolla (8530 sales versus 6246).
Holden sales were up by 13 per cent buoyed by a recovery in Commodore deliveries (up 50 per cent from a low base, year-to-date) but the brand was relegated to third place outright by Mazda.
New car sales in February 2014
Toyota 16,200 -- up 1.1 per cent
Mazda 9171 -- up 5.3 per cent
Holden 8697 -- up 13.2 per cent
Hyundai 7802 -- up 4.4 per cent
Ford 6287 -- down 4.6 per cent
Mitsubishi 4683 -- down 22 per cent
Nissan 4458 -- down 45.7 per cent
Volkswagen 4376 -- up 5.0 per cent
Subaru 3121 -- down 0.6 per cent
Honda 2662 -- down 31.1 per cent
Source: VFACTS. Percentage change compared to same month in 2012.
This reporter is on Twitter: @JoshuaDowling