AAAA Dashboard Q2 2020

DASHBOARD Q2 2020

The voice of the independent aftermarket in Australia Welcome to the Q2 2020 Edition of the Aftermarket Dashboard, a quarterly information service for members of the AAAA. This industry publication captures useful statistical and related data, as indicators of the unfolding trends and health of the automotive aftermarket industry, and has been designed to provide regular insight on our industry.

We value your suggestions for improvement or feedback regarding content.

Data sourced from VFACTS New Car Sales Data, ACA Research’s SMB Covid-19 Tracker, PwC’s US COVID-19 CFO Pulse Survey, ACA Research’s Recovery Playbook)

1.

Current State of the Market

2.

Covid-19 Impact; 3 months on

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3.

Used Car Sales Boom

4.

Industry Headlines

1. Current State of the Market

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Australian Economic Indicators Consumer Confidence

85.8

(9.7)

Westpac Melbourne Institute (Q2’20, vs. Q1’20) Consumer sentiment has fluctuated through the quarter, falling significantly in April (as we entered lockdown), and the returning to 88.1 in May, and 93.7 in June (as restrictions eased, and the household purse strings were loosened).

Despite this, sentiment remained below the 100mark, indicating a level of concern does still exist remain among Australian consumers, along with some uncertainty about the outlook over the general economic situation in the year ahead.

Fuel Prices

Business Confidence

87.3

(17.3)

Roy Morgan (Q2’20, vs. Q1’20) Business confidence hit record lows of 76.9 in April, however Australia’s comparatively positive experience of COVID-19 saw an encouraging level of recovery by June, with the index back up to 95.

While the rebound has been significant, conditions remain well below average, suggesting there is still a way to go before we return to ‘normality’.

The extension of government support measures will help here, providing businesses with more certainty through the second half of 2020.

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$1.12

( 29.8c)

AiP - Ave weekly price (Q2’20, vs. Q1’20) Looking at Q2 overall, it is safe to say that the low fuel prices in granted fuel stations all over the country were one of the few upsides.

However, after so many weeks of incredibly low petrol prices (reaching just 98c per litre in May), June is now starting to see the cost of a litre of unleaded rise again, reaching highs of $1.23.

The good news is that these fluctuations appear to be part of a new cycle, which hopefully sees prices drop back down again (encouraging increased driving activity) as we move into Q3.

4

New Car Sales By Quarter Given this year’s events, it’s unsurprising that Australian dealerships have been dealt a significant blow when it comes to new vehicle sales, with Q2 sales down by over a quarter. In real terms, this means that 76,874 less new vehicles were sold compared to Q2 2019. A boost of sales in June however does suggests there could be some signs of recovery later this year.

209,054

320,000

2020 sales volume in Q2

300,000

Year-on-Year change

280,000

-27%

260,000 240,000 220,000 200,000 Q1

Q2

Q3 2018

Q4

Q1

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Q2

Q3 2019

Q4

Q1

Q2 2020 5

New Car Sales By State New-car sales in April 2020 represented the biggest month-to-month slump on record, and the weakest result in 26 years. Over the quarter, this translated to an average 27% YoY decline in vehicle sales. Given their size, Victoria (largest % drop) and NSW (largest drop in sales volumes) were most significantly affected, but the ultimate reality is that no state is exempt.

Q2 Volume

% Chng (YoY)

Q2 Share

New South Wales

66,239

-28%

32%

Victoria

54,579

-33%

26%

Queensland

45,483

-24%

22%

Western Australia

19,647

-17%

9%

South Australia

13,480

-23%

6%

Australian Capital Territory

4,672

-7%

2%

Tasmania

3,150

-26%

2%

Northern Territory

1,804

-28%

1%

209,054

-27%

State

TOTAL

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6

New Car Sales

By Marque Q2 Rank

Mercedes-Benz 9th 3

Make 2020

Q2 Volume

% Chng YoY

Q2 Share

1

Toyota

47,658

-14%

23%

2

Mazda

18,103

-33%

9%

3

Hyundai

14,093

-43%

7%

41

Ford

13,769

-22%

7%

51

Mitsubishi

12,163

-35%

6%

6

Kia

10,979

-36%

5%

7

Volkswagen

9,846

-29%

5%

82

Nissan

7,944

-36%

4%

93

MercedesBenz

7,195

-12%

3%

101

Subaru

7,080

-39%

3%

TOTAL

209,054

-27%

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Jump in Rankings

As most of the nation gradually emerged from COVID-19 lockdowns in June, new car sales took an unexpected turn with luxury brands amongst those that benefitted the most.

Mercedes-Benz is a clear winner here, with its YoY decline of ‘just’ 12% sitting comfortably higher than the market average.

This was driven by a particularly strong result in June, where sales increased by almost a third as it introduced its new urban-friendly, seven seat GLB250 SUV. While they didn’t end up in the top 10, results were also solid for other premium brands, including Audi, BMW, and Lexus.

The recovery was also driven by strong pre-end of financial year purchasing activity by tradies and business operators, buoyed by increased access to the Federal Government’s instant asset tax write-off scheme.

7

2. COVID-19 State of Play: 3 MONTHS ON

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COVID-19 Impact: 3 MONTHS ON (Insights from ACA Research’s SMB Covid-19 Tracker 5th July)

62%

68%

47%

40%

of businesses surveyed have experienced a decline in revenue due to the COVID-19 pandemic

of these revenue declines have been more than 30%

expect revenues to return to pre COVID19 levels by October, compared to 53% four weeks earlier

81%

48%

55%

believe JobKeeper should be extended until 2021

are likely to reduce employee numbers if JobKeeper is not extended

satisfied with the Government and state’s collaboration in managing the crisis

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Of SMB’s are concerned about businesses survival

Despite many SMEs seeing a level of revenue recovery in June, two thirds are still trading below pre-COVID revenues (including almost half where revenue is down more than 30%).

Consequently, the importance of the Government’s decision to extend its stimulus and support measures until 2021 cannot be over-emphasised.

Underpinning this decision, almost half of SMEs claimed they were likely to reduce employee numbers if no extension to JobKeeper was forthcoming. We will need to wait and see what impact the tighter eligibility criteria will have as we move into October.

9

COVID-19 and the automotive industry (Insights from PwC’s US COVID-19 CFO Pulse Survey)

Top concerns in the global automotive industry

71%

64%

Financial impact, including effects on results of operations, future periods and liquidity and capital resources

Potential global recession

We can also draw on data to explore the impact of the pandemic beyond Australian shores. This highlights the significant challenges that continue to face the global automotive industry, with business as usual a distant memory, and economic uncertainty an ongoing concern.

41% The effects on our workforce/reduction in productivity

A number of major production hubs and key links in the global automotive supply chain are amongst the worst hit areas. Whilst companies have contingency plans in place to maintain operational effectiveness following events like natural disasters, they don’t generally take into account a pandemic that leads to widespread quarantines, extended school closures, and global travel restrictions.

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40%

23%

Decrease in consumer confidence reducing consumption

Supply chain disruptions

At an OEM level, this has led to disrupted new vehicle supply chains, delaying the arrival of new stock onto Australian shores, and limiting their ability to meet customer demand. Similarly, global part and accessory supplies have been impacted, potentially creating difficulties obtaining products being manufactured offshore.

10

3. COVID-19 Used Car Boom

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The Used Car Sales Boom 142,284

144,286

142,400

147,800

154,050

162,773

169,197

Total Used Car Listings

176,909

(Insights from ACA Research’s Recovery Playbook)

Although new car sales are down dramatically, it’s not all bad news; the used car market is booming. So much so that availability of dealer used cars has been declining, with demand outstripping supply as buyers locked in purchases before June 30.

This is being driven by a range of factors, with demand up off the back of consumers seeking affordable alternatives to public transport, and restrictions to international and interstate travel directing tourism towards country areas within easy driving range of capital cities.

On the supply side, we’re also seeing fewer in-warranty used cars coming onto the market, with individuals and fleets taking a more cautious approach, and deferring vehicle replacement to reduce spending.

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12

What does this mean for the aftermarket?

Short term demand will skew to more older vehicles

Despite ongoing uncertainty, the used car sales boom that we have witnessed over the past 12 weeks will certainly go some way in softening the impact for independent automotive workshops.

With Utes and SUVs amongst some of the most popular models being bought second hand, it is unsurprising that companies such as ARB are also seeing increased demand despite the current economic situation.

Less demand for parts or accessories for newer models impacts ranging decisions

Other manufacturers, distributors, and retailers are seeing similar results, showing that large parts of the aftermarket are well placed to benefit from this increased demand, even if it is just in the short-term.

As we move through the end of 2020, and into 2021, we do however need to consider what next. Which of the behaviours we’re seeing now will remain entrenched, and which will revert to ‘normal’?

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Opportunities to attract used car buyers into aftermarket (not dealer) workshops

Given that, now is the ideal time to look at existing issues within your business (to help reduce costs, be more efficient, etc), or alternately to prepare for the future by identifying new ways of doing business that can position the business better as we move out of the pandemic.

13

3. Industry Headlines

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Industry Headlines Pandemic spins growth for mobile tyre fitter As many automotive industry retailers and suppliers have struggled since the advent of the COVID-19 pandemic, a Melbourne-based independent mobile tyre retailer and fitting service has experienced double-digit sales growth, increased its workforce and expanded its national vehicle fleet.

Toyo releases new premium light-commercial tyre Toyo Tyres has released its re-designed premium NanoEnergy Van tyre specifically targeting owners of vans, utes, people movers, motorhomes, caravans and trailers.

It says the NanoEnergy Van tyre builds on the reputation of its predecessor, the Toyo HO8, as the ideal tyre for light-commercial vehicle use.

Aussie car buying habits have changed due to COVID-19 While recent months have seen unprecedented disruption of Australian business across several industries, Dayco’s Australian and New Zealand automotive aftermarket business continues to defy the effects of the Covid19 pandemic.

The company’s Australian and New Zealand sales have increased year on year, which has seen Dayco Australia’s recently extended and modernised distribution centre located in Hallam (Victoria) operate at full capacity, literally requiring all hands on deck.

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As the Covid-19 crisis hammers the auto industry, electric cars remain a bright spot Beyond the immediate impact on health, the Covid-19 pandemic is causing a major shock to the global economy. Electric cars – a key element of transitions to cleaner energy – are being affected in key markets. But despite the crisis, their sales could reach a record share of the overall car market this year.

Electric cars have experienced a decade of rapid growth. Global sales grew by more than 60% every year over the past decade except for 2019, when growth slowed down to 6% as the regulatory environment changed in China and passenger car sales contracted in major markets. Even so, electric vehicle sales still reached 2.2 million last year, securing their highest ever share – 2.6% – of the global car market.

Used car prices rebound from coronavirus lows In March and April, prices for used vehicles experienced their largest twomonth drop on record in Australia, contracting by 14 per cent.

But they bounced back strongly in May, by 10.6 per cent, to be almost back to pre-pandemic levels.

The quick recovery in prices, tracked by the new Datium Insights-Moody's Analytics Used Vehicle Price Index, has been driven by a number of factors.

About AAAA

About ACA Research

The Australian Automotive Aftermarket Association, is the national industry association representing manufacturers, distributors, wholesalers, importers and retailers of automotive parts and accessories, tools and equipment, as well as providers of vehicle service, repair and modification services in Australia.

With over 20 years of automotive experience, ACA Research has developed a detailed understanding of the automotive sector, Using this market knowledge, we design and deliver research that helps our clients understand and overcome their business issues, empowering them to move forward with confidence.

For more information, please contact:

For more information, please contact:

Lesley Yates

Ben Selwyn

Lizzie Dawson

Director of Government Relations and Advocacy Australian Automotive Aftermarket Association (AAAA) Convenor: Automotive Products Manufacturers & Exporters Council (APMEC)

Director ACA Research 0411 132 166 bselwyn@acaresearch.com.au

Senior Account Manager ACA Research 0433 708 375 ldawson@acaresearch.com.au

7-8 Bastow Place Mulgrave VIC 3170 Australia +61 (3) 9545 3333 | 0402 005 476 lyates@aaaa.com.au

Level 6, 107 Mount St North Sydney NSW 2060 Australia +61 (2) 9927 3333

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