5 May 2020

Covid-19: New car sales drop 90 percent in $450m revenue hit

3:41 pm on 5 May 2020

Sales of new vehicles have taken a massive hit with registrations down by 90 percent for April compared to the previous year.

car generic, car sales, vehicle sales

File photo. Photo: 123RF

That is a loss of revenue of about $450m.

In April, just over 1000 new vehicles were sold, compared to nearly 11,000 in April last year.

Motor Industry Association chief executive David Crawford said while car yards may start offering some good deals for customers, they could not afford to make a loss.

"Buying and selling cars, particularly new cars, is a very capital-intensive sector and if you don't have revenue coming through you have to service that capital, and that is what is really hard for franchised dealers out in the economy."

Crawford said imports of new cars had still been coming in over the lockdown period because they were booked in advance.

"There is a bottleneck at storage locations but in April we saw some of the import volumes begin to drop down.

"I expect over the coming months there will be significant adjustments by the distributors in their product planning going forward."

He said the industry was expecting a 40-45 percent hit to sales for the year compared to 2019.

"That is a big drop so all of those adjustments will be made in coming months."

Crawford said the industry was normally worth between $8 billion and $9bn a year, and that was likely to halve.

"We expects forecasts for new car sales will drop off dramatically and is an inevitable outcome of what is happening in New Zealand and around the world."

The association called on the government to help kickstart the new vehicle sector.

Crawford said the government needed to provide incentives to take vehicles over 20 years old off the road.

He said New Zealand had a very large and old fleet.

"By providing a financial incentive for people to take those cars out of the fleet, they can then buy the next car up and that has a flow-on effect from the bottom-end right through to the top-end," he said.

"We think vehicle scrappage needs to be looked at and we believe the government should set up an industry working group to see if we could develop one to work in the New Zealand context."

Crawford said the government should also increase the uptake of pure electric and hybrid vehicles to its fleet.

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