Why car dealers are fudging the numbers of cars they actually ‘sold’
It should be simple really. Add up all the vehicles that have been sold to customers, and the total should be the number of new vehicles on Australia’s roads.
- Thousands of cars are sitting in dealerships all over Australia, misleadingly counted as “sold”
- Dealers claim they are bullied by manufacturers to buy excess cars
- It is estimated the number of cars “sold” is over-reported by 340,000 per year to meet inflated sales targets
It’s anything but.
According to the official figures the industry, is heading for its sixth consecutive year of sales of more than a million.
Or is it?
Not according to the Victorian Automobile Chamber of Commerce.
“We think that there’s an over-reporting of vehicles sold to consumers by about 340,000 vehicles a year,” Chamber’s chief executive Geoff Gwilym told ABC News.
An over-reporting dealers claim is forced on them by foreign manufacturers dumping cars into the Australian market to reach inflated sales targets.
They’re known in the industry as “cyber cars”.
“Many dealers are afraid not to take these cars,” he said.
“And these are cars that the dealer has to buy and register so they look as though they are sold, when in actual fact, they’re not sold to a consumer.”
They do eventually get sold to a customer, often months later, at huge discounts, which wipes out dealer profits.
And for good measure there is a reduced warranty, because the warranty period starts when the car is registered.
Deceptive car sale figures distort the economy
The ABC spoke to a number of car dealers in preparing this report.
We heard chapter and verse of the bullying of dealers into buying cars for which there was no genuine customer demand.
However, no dealer was prepared to speak publicly, out of fear of reprisals from the car manufacturers.
And the over-reporting of sales has implications outside the car industry.
Economists see new vehicle purchases as an early warning sign of the state of the housing market, which is an indicator of the state of the economy.
“When car sales are going up it shows a degree of confidence, and we tend to see home sales, and home prices going up at the same time,” CommSec chief economist Craig James said.
He added that, although the car market remains strong, the last few months have shown it is softening.
“Car affordability is probably the best it’s ever been — but people are a little bit more conservative, a little bit more cautious, particularly given that home prices are flattening out.”
And while many car dealers feel their businesses are being damaged by bullying manufacturers, they are also seeing a threat from the events which unfolded at the banking royal commission.
In particular, tougher lending standards, which will mean loans that may have been waived through in the past will now be knocked back.
“You know, the plumber, the tradie, the carpenter who’s got to have a work ute, but hasn’t got robust cash flow,” Australian Automotive Dealers Association chief executive David Blackhall said.
“He’s got enough, but can’t convince the bank that he should have that loan.”
When has a car been ‘sold’?
And then there is the political turmoil in Canberra, which is being felt throughout the economy, including the car industry.
“So you get this little negative bubble that gets into the equation,” he said.
“People who might have spent on a new car pull back a little and then you see that trickle-down effect.
“And so you see the 3 per cent, 4 per cent, 5 per cent, month to month decrease that we’ve seen over the last six months.”
That is of course, if you can believe the figures, which could be up to a third lower than reported.
It is why the industry is pushing the Government for a legislated definition of what a “car sale” is.
“It would seem fair that a car is sold when a consumer buys that car, it’s registered to a consumer, it’s got a number plate on it, and it drives out of the dealership,” Mr Gwilym said.
At the moment there are thousands of cars sitting in dealerships all over Australia, counted as sold, when under that definition they are not.
Not a good look for an economy which could be headed for the slow lane.