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G3911MotorVehicleDealersinAustraliaIndustryReport.pdf
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INDUSTRY REPORT G3911
Motor Vehicle Dealers in Australia
Sales pitch: Consumer preferences have continued to shift towards smaller vehicles
Yin Huey Yeoh | June 2019
Motor Vehicle Dealers in Australia June 2019
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Contents ABOUT THIS INDUSTRY....................................4
Industry Definition............................................................ 4 Supply Chain..................................................................... 4 Major Players.................................................................... 4 Main Activities.................................................................. 4 Similar Industries.............................................................. 4 Related International Reports........................................... 4
AT A GLANCE................................................... 6
Key Statistics Snapshot..................................................... 6 Key Trends........................................................................ 6 SWOT in the Industry........................................................ 6 Executive Summary........................................................... 6 Industry Structure............................................................. 7 Key Industry Data..............................................................7 Major Players.................................................................... 8 Products & Services Segmentation................................... 8
INDUSTRY PERFORMANCE.............................. 9
Key External Drivers.......................................................... 9 Current Performance.......................................................11 Industry Data Timeseries.................................................13 ....................................................................................... 13
INDUSTRY OUTLOOK..................................... 14
Industry Life Cycle........................................................... 15
PRODUCTS & MARKETS.................................16
Products & Services Segmentation................................. 16 Demand Determinants.................................................... 19 Major Markets.................................................................20 International Trade......................................................... 22 Business Locations.......................................................... 22
COMPETITIVE LANDSCAPE.............................23
Market Share Concentration........................................... 23 Key Success Factors........................................................ 23 Cost Structure Benchmarks............................................. 24 Basis of Competition....................................................... 25 Barriers to Entry.............................................................. 26 Industry Globalization..................................................... 26
MAJOR COMPANIES...................................... 27
Major Players.................................................................. 27 Other Players.................................................................. 28
OPERATING CONDITIONS..............................29
Capital Intensity.............................................................. 29 Potential Disruption........................................................ 29 Technology & Systems................................................... 30 Revenue Volatility........................................................... 30 Regulation & Policy........................................................ 30 Industry Assistance......................................................... 31
KEY STATISTICS.............................................. 32
Industry Data.................................................................. 32 Annual Change............................................................... 32 Key Ratios....................................................................... 32 Additional Resources...................................................... 33 Industry Jargon............................................................... 33 Glossary.......................................................................... 33
Legend Icons are used throughout the report to indicate impact on the industry.
Negative impact
Neutral impact
Positive impact
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About This Industry Industry Definition The Motor Vehicle Dealers industry includes dealerships primarily engaged in selling new or used motor
vehicles to consumers, companies and government entities. Industry firms also offer after-sale services for motor vehicles.
Supply Chain Supply Industries
Motor Vehicle Manufacturing
Motor Vehicle Wholesaling
Motor Vehicle Electrical Services
Motor Vehicle Engine and Parts Repair and Maintenance
Demand Industries
Taxi and Limousine Transport
Passenger Car Rental and Hiring
- Consumers
Major Players Automotive Holdings Group A P Eagers
Main Activities The primary activities of this industry:
New motor vehicle retailing
Used motor vehicle retailing
After-sale services
The major products and services in this industry:
Commercial vehicles
Small passenger vehicles
Medium passenger vehicles
Large passenger cars and other vehicles
After-sale service
Compact SUVs
Sports utility vehicles (SUVs)
Utility vehicles
Similar Industries C2311 - Motor Vehicle Manufacturing in Australia Companies in this industry manufacture motor vehicles.
F3501 - Motor Vehicle Wholesaling in Australia
Companies in this industry wholesale motor vehicles.
F3504 - Motor Vehicle New Parts Wholesaling in Australia
Companies in this industry wholesale new parts for motor vehicles.
G3912 - Motorcycle Dealers in Australia
Companies in this industry retail motorcycles.
Related International Reports
F4111-GL - Global Car & Automobile Sales
This industry retails new and used motor vehicles mainly through dealerships, commission agents and car auctions. Products sold in this industry include passenger cars, SUVs, light trucks, heavy trucks, buses, recreational vehicles and specialty vehicles, such as ambulances and fire trucks. Retail sales of motorcycles, mopeds and bicycles are not included in this industry.
44111 - New Car Dealers in the US
This industry sells new and used passenger vehicles. Vehicles include passenger cars, light trucks, sport
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utility vehicles (SUVs) and passenger vans. New car dealers also sell parts and provide repair services.
44112 - Used Car Dealers in the US
This industry sells used passenger vehicles, including passenger cars, light trucks, sports utility vehicles (SUVs) and passenger vans. Used car dealers also provide financing and insurance services.
OD5068 - Online Car Dealers
This industry retails automobiles online to consumers and businesses and provides services to aid in the purchase of automobiles. Automobiles include passenger cars, trucks and sports utility vehicles (SUVs). Some players offer their customers trade-in, car financing and car selling services. This industry does not include classified websites that feature reviews, guides, photos and advertisements of new and used vehicles for sale.
OD5626 - Truck Dealers
This industry comprises operators that sell medium and heavy-duty commercial trucks. In addition to new truck sales, many companies offer a wide variety of used trucks and new truck parts. Many dealers also provide truck repair services. This industry does not include light truck or sport utility vehicle (SUV) dealers.
OD5716 - Classic Car Dealers
This industry sells classic and antique cars. IBISWorld defines a classic car as either a foreign- or US-made vehicle that was manufactured more than 25 years ago and is no longer in production. An antique car is defined as a vehicle manufactured more than 45 years ago. Companies may sell previously purchased cars or third-party vehicles on consignment. They may also sell vehicles at an auction, but individuals who sell their own cars at an auction are excluded from this industry.
6561 - Car Dealers in China
Firms in the Car Dealers industry retail new and used passenger automobiles. These cars are used to carry passengers and their personal luggage, and have no more than nine seats. The main products retailed in the industry include sedans and general cars, multi-purpose vehicles (MPVs), sports utility vehicles (SUVs), and crossover passenger cars.
G45.111 - New Car & Light Motor Vehicle Dealers in the UK
Companies in this industry sell new cars and other light motor vehicles to consumers. Wholesalers that sell directly to fleet markets are included in the industry. The vehicles sold include passenger cars, SUVs, specialised vehicles such as ambulances and any other vehicles weighing less than 3.5 tonnes. The sale of used vehicles is not included in the industry.
G45.112 - Used Car & Light Motor Vehicle Dealers in the UK
Dealers and auctioneers in this industry sell used cars and other light motor vehicles. Vehicles sold include passenger cars, SUVs, jeeps and any other vehicles weighing less than 3.5 tonnes, including ambulances and minibuses. The sale of new vehicles and private-to-private and business-to-business sales are excluded from the industry.
44111CA - New Car Dealers in Canada
This industry sells new and used passenger vehicles. Vehicles include passenger cars, light-duty trucks, sport utility vehicles (SUVs) and passenger vans. New car dealers also sell parts and provide repair services.
44112CA - Used Car Dealers in Canada
This industry sells used passenger vehicles, which includes cars, light trucks, sport utility vehicles and vans. Used car dealers also provide parts and repair services and financing and insurance.
G3910NZ - Motor Vehicle Retailing in New Zealand
Industry participants sell new and used motor vehicles. These include passenger motor vehicles, commercial vehicles, motorcycles, RVs and trailers. Industry participants also offer after-sales services.
G45.100IE - Motor Vehicle Dealers in Ireland
Firms in the industry sell new and used passenger and light motor vehicles to private and commercial customers including fleet purchases. The vehicles sold include passenger cars, SUVs and specialised vehicles weighing less than 3.5 tonnes. The industry does not include private-to-private sales.
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At a Glance Key Statistics Snapshot
Total Revenue 2019
$60.2bn
Annual Growth 2014-2019
-0.9%
Annual Growth 2019-2024
1.4% Profit Margin
2019
2.4%
Wages as a share of Revenue 2019
9.4%
Number of Businesses 2014-2019
-1.3%
Key Trends Larger players have focused on acquisitions to ensure they retain or increase their market share The shift in demand towards smaller cars has driven down average industry revenue per vehicle sold
Price competition across brands at all levels of the supply chain has affected profit growth
Industry revenue is anticipated to grow over the next five years, driven by increasing vehicle sales
The market for motor vehicles is anticipated to remain highly competitive over the next five years
The consumer trend towards smaller and more fuel-efficient vehicles is projected to continue
SWOT in the Industry
Strengths
Low Imports
Low Product Concentration
High Labor Efficiency
Low Capital Intensity
Weaknesses
High Competition
Low & Steady Assistance
Low Profit
High Customer Concentration
Opportunities
Motor vehicle price index
Threats
Low Long-term Growth
Low Short-term Growth
Outlier Growth
Low Outlook Growth
Low Performance Drivers
New passenger motor vehicle sales
Executive Summary
The Motor Vehicle Dealers industry has had a bumpy ride over the past five years.
The industry's performance has been strongly linked to the sale of new motor vehicles. Early in the past five-year period, high fuel prices encouraged consumers to purchase smaller, cheaper and more fuel- efficient cars. Although fuel prices have since fallen considerably, consumer preferences have continued to shift towards smaller vehicles in response to increased environmental awareness and periods of negative consumer sentiment. Therefore, dealerships have been selling higher volumes of cheaper small cars than costlier large cars, resulting in average revenue per vehicle sold declining. Overall, industry revenue is expected to decline at an annualised 0.9% over the five years through 2018-19, to $60.2 billion.
Motor vehicle dealers have benefited from positive business confidence over the past five years. Growth and expansion in small businesses and sole traders have contributed to growing demand for utility and commercial vehicles over the period. This demand has helped offset the trend towards cheaper small cars, as utility and commercial vehicles are typically more expensive than passenger vehicles. However, the depreciation of the Australian dollar over the past five years has increased industry purchase costs, as industry products have increasingly been imported over the period. Industry revenue is expected to decrease by 3.9% in 2018-19, due to a decline in new passenger motor vehicle sales, rising concern
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regarding the slowing housing market, weak inflation and tighter lending practices.
However, new passenger vehicle sales are anticipated to increase over the next five years, as consumer preferences continue to shift towards smaller, more fuel-efficient vehicles. Medium and compact SUVs and electric and hybrid vehicles are anticipated to be areas of industry growth, as these vehicle types become increasingly popular. The removal of tariffs on imported motor vehicles from South Korea in 2014 and Japan in 2015 under free trade agreements have reduced the cost of imported motor vehicles. In addition, the Australian dollar is forecast to appreciate over the next five years, alleviating cost pressures on imported cars. Coupled with projected discretionary income growth, industry revenue is forecast to increase at an annualised 1.3% over the five years through 2023-24, to $64.4 billion.
Industry Structure Level Trend
Life Cycle Mature
Revenue Volatility Medium
Capital Intensity Low
Industry Assistance Low Steady
Concentration Level Low
Level Trend
Regulation Level Medium Steady
Technology Change Medium
Barriers to Entry Medium Steady
Industry Globalization Low Steady
Competition Level High Increasing
Key Industry Data
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Major Players
Products & Services Segmentation
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Industry Performance Key External Drivers
o New passenger motor vehicle sales
New passenger motor vehicle sales account for a significant proportion of revenue for industry firms. Therefore, higher new vehicle sales typically boost industry revenue. However, this figure does not account for the average value of vehicles sold. The number of new passenger motor vehicle sales is expected to fall in 2018-19.
o Real household discretionary income
Real household discretionary income is a measure of the household income available to spend after all essential expenses have been covered. Growth in discretionary income positively affects demand for new and used motor vehicles. When household discretionary income increases, consumers have more funds to spend on high-value, but typically non-essential items such as new motor vehicles. Real household discretionary income is expected to increase in 2018-19, representing an opportunity for the industry.
o Motor vehicle price index
The motor vehicle price index measures the affordability of motor vehicles for consumers. A lower index indicates that motor vehicles are more affordable, which typically translates to greater demand for industry products. Dealers make less revenue per vehicle when the index falls, which can constrain industry revenue growth. However, a fall in the index will usually increase industry sales volumes, which typically outweighs the decline in revenue per unit sold. The motor vehicle price index is expected to fall slightly in 2018-19, presenting an opportunity for industry operators to boost their sales.
o Business confidence index
The business confidence index is an indicator of general business conditions, represented by businesses' perceived financial position and economic outlook. When the index is positive, businesses are considered optimistic and are more likely to increase capital expenditure on items such as motor vehicles. As a result, positive business confidence typically increases industry demand. Business confidence is expected to decrease but remain positive in 2018-19.
o Retail petrol prices
Fuel is an ongoing cost that consumers consider when purchasing a motor vehicle. High fuel costs can lead to some consumers forgoing motor vehicles altogether. More commonly, high fuel prices prompt consumers to purchase smaller, more fuel-efficient motor vehicles instead of larger models. Smaller motor vehicles are cheaper and generate less per-unit revenue for the industry. As a result, a rise in retail petrol prices typically constrains industry revenue, as more people are convinced to purchase fuel-efficient vehicles. Retail petrol prices are expected to rise in 2018-19, representing a threat to the industry.
o Trade-weighted index
The trade-weighted index measures the strength of the Australian dollar relative to the currencies of Australia's major trading partners. When the trade-weighted index rises, motor vehicles become cheaper to import into Australia. The cost savings are generally then passed on to consumers, driving greater demand for imported motor vehicles. The trade-weighted index is expected to decline in 2018-19, making imported vehicles more expensive, representing a threat to the industry.
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Current Performance Operators in the Motor Vehicle Dealers industry have faced volatile operating conditions over the past five years.
Growing demand from business customers for light commercial vehicles, such as Toyota HiLux and Ford Ranger, and stronger demand for smaller fuel-efficient cars contributed to industry revenue growth at the start of the five-year period. More consumers have been favouring smaller, fuel-efficient cars and compact SUVs, which are typically cheaper than larger vehicles, to reduce vehicle operating costs and alleviate environmental concerns. However, greater price competition, falling per-unit revenue and weak discretionary income growth have constrained the pace of industry expansion. Overall, industry revenue is expected to decline at an annualised 0.9% over the five years through 2018-19, to $60.2 billion. This trend includes an anticipated 3.9% decline in the current year, due to growing concern regarding the slowing housing market, weak inflation and tightening money lending regulations.
Industry participation
Industry enterprise numbers have fallen over the past five years. Larger industry players have focused on acquisitions to ensure they retain or increase their market share, and achieve economies of scale that allow them to sell vehicles at lower prices. The high number of acquisitions has contributed to the number of industry enterprises declining over the past five years, although the revenue generated per enterprise has increased. Despite this decline, industry employment numbers have remained steady as employees are usually required to cater for sales volumes.
Affordable cars
Motor vehicles have become more affordable over the past decade, as the quality of cheaper vehicles has improved. Despite a weak Australian dollar over the past five years, vehicles have remained affordable due to free trade agreements (FTAs) being implemented with major import partners that have removed tariff rates. While low interest rates have made vehicles more affordable, tighter lending practices due to the findings of the Financial Services Royal Commission have contributed to the number of new car sales declining.
Due to environmental concerns and the potential to reduce vehicle operating costs, private consumer preferences have shifted towards smaller, more fuel-efficient cars and compact SUVs. However, the shift in demand towards smaller cars has driven down the average dealer revenue per vehicle sold, as smaller cars like the Mazda3, Toyota Corolla and Hyundai i30 are typically cheaper than larger cars. This shift was evident in the declining sales of large cars previously manufactured in Australia, such as the Holden Commodore and Toyota Aurion. Increasing sales of small cars have caused per-unit prices to fall. In addition, volatile consumer sentiment and weak discretionary income growth over the past five years have led to consumers delaying new motor vehicle purchases or opting for second hand vehicles. As a result, industry revenue has declined over the period.
Business sales
Positive business confidence over the past five years has contributed to business sales increasing as a share of industry revenue. Rising demand from small businesses and sole traders in agriculture markets has primarily driven this growth, as large businesses often purchase vehicle fleets directly from wholesalers. An upturn in mining activity since 2016-17 has also supported business sales. As a result, vehicles with commercial applications, such as the Toyota HiLux, have been strong sellers. The HiLux has been Australia's best-selling car since 2015-16, while the Ford Ranger and Mitsubishi Triton have consistently been among the top 10 best sellers over the past five years. Growing demand for utility and commercial vehicles, which are typically more expensive than regular passenger vehicles, has supported industry revenue and helped offset the trend towards smaller, lower margin vehicles.
Import penetration
Over the past five years, the industry has continued to benefit from the reduction in the motor vehicle tariff from 10.0% to 5.0%, which occurred on 1 January 2010. This tariff reduction has made imported vehicles cheaper, with the savings spread throughout the supply chain. Growth in sales of imported vehicles, such as Toyota, Mitsubishi and Honda vehicles, has also been boosted by FTAs with Japan (implemented January 2015) and Korea (implemented December 2014), which removed the motor vehicle tariff on imports from these major vehicle-producing countries. These FTAs followed the FTA with Thailand, another major source of imported vehicles sold in Australia, which was implemented in January 2005.
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Smaller motor vehicles that are now popular with consumers and businesses in Australia are imported. Imports are usually cheaper, due to the economies of scale that larger Asian car manufacturers can achieve. Therefore, consumers and businesses have saved money on imported new vehicles, which has boosted demand. Due to strong import penetration, the remaining local car manufacturers, Toyota and GM Holden, wound up their domestic manufacturing operations in October 2017 and moved production offshore. This move is expected to benefit the Motor Vehicle Dealers industry as dealerships can capture wider margins on imported vehicles. However, intense price competition across different brands at all levels of the supply chain has decreased industry profit margins over the past five years.
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Industry Data Timeseries
Revenue ($m)
IVA ($m)
Estab. (Units)
Enterprises (Units)
Employment (People)
Exports ($m)
Imports ($m)
Wages ($m)
Domestic Demand
($m) 2006-07 70,064 8,034 6,539 5,370 76,500 N/A N/A 5,935 N/A
2007-08 70,830 8,186 5,858 5,085 81,000 N/A N/A 6,076 N/A
2008-09 62,059 7,300 6,073 5,073 74,250 N/A N/A 5,420 N/A
2009-10 63,233 7,006 5,650 4,829 77,250 N/A N/A 5,122 N/A
2010-11 60,336 7,114 5,819 4,797 79,500 N/A N/A 5,370 N/A
2011-12 62,074 7,716 5,833 4,742 78,000 N/A N/A 5,711 N/A
2012-13 65,033 7,635 5,704 4,602 79,500 N/A N/A 5,658 N/A
2013-14 62,928 7,451 5,717 4,572 78,563 N/A N/A 5,601 N/A
2014-15 65,570 8,052 5,602 4,494 77,844 N/A N/A 6,032 N/A
2015-16 67,091 8,467 5,679 4,475 79,500 N/A N/A 6,246 N/A
2016-17 65,364 7,929 5,642 4,373 78,266 N/A N/A 5,922 N/A
2017-18 62,665 7,644 5,627 4,362 78,733 N/A N/A 5,881 N/A
2018-19 60,211 7,437 5,425 4,272 78,726 N/A N/A 5,684 N/A
2019-20 60,945 7,468 5,438 4,248 78,937 N/A N/A 5,720 N/A
2020-21 61,906 7,638 5,319 4,155 78,780 N/A N/A 5,986 N/A
2021-22 62,531 7,592 5,343 4,142 78,838 N/A N/A 5,972 N/A
2022-23 63,383 7,763 5,220 4,046 78,798 N/A N/A 6,168 N/A
2023-24 64,371 7,874 5,115 4,028 79,328 N/A N/A 6,308 N/A
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Industry Outlook Revenue for the Motor Vehicle Dealers industry is projected to grow
over the next five years, with new vehicle sales expected to drive the industry's performance over the period.
The ongoing shift in consumer demand towards fuel-efficient cars is anticipated to further stimulate new car sales. The Australian dollar is forecast to appreciate over the next five years, alleviating cost pressures on imported cars. Free trade agreements (FTAs) and lower production costs, stemming from economies of scale in vehicle manufacturing countries, are projected to contribute to the motor vehicle price index declining over the next five years. Overall, industry revenue is forecast to increase at an annualised 1.3% over the five years through 2023-24, to $64.4 billion.
The number of industry enterprises is forecast to fall over the next five years. Industry consolidation is anticipated to continue, with larger players such as Automotive Holdings Group and A.P. Eagers continuing to acquire small dealerships to increase their market share. Consolidation by the larger players will likely boost revenue per enterprise. However, industry employment is projected to increase slightly as more staff are required to accommodate rising sales volumes. Additionally, as competition between dealers continues to grow, industry players are likely to hire more employees to provide better customer service.
New vehicles
The composition of vehicles on Australian roads has changed significantly over the past five years, as consumer preferences have moved towards more fuel-efficient vehicles. Small cars and SUVs have become increasingly popular at the expense of demand for larger, less fuel-efficient vehicles. This trend is anticipated to continue over the next five years. However, sales of utility vehicles, such as the Toyota HiLux and Ford Ranger, and commercial vehicles, such as the Toyota HiAce and Hyundai iLoad, are also projected to grow. Sales of these larger vehicles will likely rise in response to anticipated positive business confidence and growing demand from construction and mining markets over the next five years.
Import tariffs
The Korea-Australia FTA introduced in December 2014 and the Japan-Australia Economic Partnership Agreement introduced in January 2015 have removed trade tariffs on imported motor vehicles from these two countries, which has increased the affordability of several vehicles sold locally. The motor vehicle tariff was imposed as a form of protection for Australia's local motor vehicle manufacturers. However, the last local car manufacturers, Toyota and GM Holden, have ceased local manufacturing operations, eliminating the need for a tariff.
Imports from Japan, Korea and Thailand account for over half of all vehicle sales in Australia. While the official tariff on motor vehicles will not necessarily be abolished, existing FTAs with these major import markets means that many imported vehicles are subject to a reduced tariff or none at all. This factor makes imported vehicles more price-competitive and supports demand for motor vehicle dealers, particularly as competitive industry operators tend to pass on cost savings.
Competitive market
The market for motor vehicles is anticipated to remain highly competitive, with many dealerships competing on price and after-sales service to increase their market share. As a result, dealer profit margins are anticipated to decline over the next five years. Intense competition among dealers to keep prices low will likely prevent growth in dealers' profit margins.
Oil slump
The collapse in oil prices in 2014-15 led to a significant decline in retail petrol prices in Australia. According to the Australian Institute of Petroleum, the average weekly retail petrol price declined by almost 20% over the three months through January 2015, falling from 142 cents per litre to 116 cents per litre. Retail petrol prices have since recovered, but remain comparatively low. Retail petrol prices are projected to increase over the next five years. As a result, demand for fuel-efficient vehicles is projected to increase. Electric and hybrid vehicles are also anticipated to increase in popularity over the next five years, in response to higher fuel costs and the possibility of the Federal Government tightening emission standards for motor vehicles.
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Industry Life Cycle The life cycle stage of this industry is Mature
NOTE
Key Considerations: An industry's life cycle stage is determined by multiple factors, such as IVA vs. GDP performance and establishment growth. Other qualitative factors must also be considered, which mean that the indicative life cycle stage shown above may not reflect the industry's actual life cycle stage as determined by the analyst. Please refer to the below analysis for more information.
Life Cycle Reasons
o The number of industry establishments in declining
o Consumers have increasingly purchased new, fuel-efficient cars
o Industry firms are focusing on acquisitions to maintain growth rates
The Motor Vehicle Dealers industry is in the mature phase of its life cycle. Industry value added (IVA), which measures an industry's contribution to the overall economy, is forecast to rise at an annualised 0.6% over the 10 years through 2023-24. This represents an underperformance of overall GDP, which is projected to increase at an annualised 2.6% over the same period.
The industry's revenue performance is largely tied to the volume of new car sales. Higher environmental awareness and the ability to reduce vehicle operating costs over the past five years have encouraged consumers to purchase cheaper, more fuel-efficient cars and SUVs. Given these vehicles generate less revenue per unit, industry revenue has declined over the same period. The decrease in new car sales over the same period has also contributed to industry revenue decline. The number of industry enterprises and the number of establishments have also declined over the past five years, which indicates a mature industry. Cheaper motor vehicles prices have also been a result of strong price competition among dealers and increased production efficiency overseas.
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Products & Markets Products & Services Segmentation
The Motor Vehicle Dealers industry's product segmentation reflects vehicles sold by motor vehicle dealers and vehicle servicing.
The sale of parts and accessories and vehicle financing, which are also undertaken by motor vehicle dealers, are excluded from the industry. The segmentation is based on all vehicle sales, including new and used cars. The industry has been divided according to the types of vehicles that motor vehicle dealers sell, excluding trucks.
Sports utility vehicles
Sports utility vehicles (SUVs) feature a wagon-style body, high ground clearance, a light-truck chassis, and can have up to 12 cylinders of engine power. This segment has increased as a share of industry revenue over the past five years due to the vehicle's popularity among upper-middle class consumers, in addition to their reputation as safe and comfortable family cars. While this segment does not include compact SUVs, it includes a variety of vehicle sizes, with multiple models being sold by various car brands. Examples of SUVs on the market include the Mazda CX-5 and CX-9; Hyundai Tucson; Subaru Forester; Mitsubishi Outlander, Challenger and Pajero; Nissan X-Trail, Pathfinder and Patrol; and Toyota RAV4, Kluger, LandCruiser Wagon and Prado.
Small passenger cars
Small passenger cars generally have four- or six-cylinder engines and feature a sedan, hatch or wagon body. Passenger capacity in these cars ranges from two to five people. Small passenger car sales have increased, due to being more fuel-efficient and less costly to run than larger cars. However, this segment has declined as a share of industry revenue over the past five years due to the growing popularity of SUVs and utility vehicles. This segment includes cars such as the Ford Focus, Holden Cruze, Honda Civic, Hyundai i30, Kia Cerato, Mazda3, Mitsubishi Lancer, Nissan Pulsar, Subaru Impreza, Toyota Corolla and Volkswagen Golf. Light passenger vehicles are also included in this segment. These vehicles typically have the same range of body shapes and passenger capacity as small passenger cars, with three- or four-cylinder engines up to 1.5 litres. Light passenger vehicles include the Mazda2, Hyundai Accent, Kia Rio, Toyota Yaris and Suzuki Swift.
Utility vehicles
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Utility vehicles, or utes, are commonly two-wheel or four-wheel drive, central-control cab utility or pick-up vehicles. Utes are typically used for commercial purposes and are commonly found on construction sites. Utility vehicles are sold to companies, small businesses, farmers, sole traders and private consumers. The utility vehicles segment has increased as a share of industry revenue over the past five years, with the Toyota HiLux and Ford Ranger consistently ranking among the best selling vehicles over the period. Growing demand from the agriculture and construction sectors has partly driven growth in this segment.
Two main types of utility vehicles exist on the market. Some utes, like the Holden Commodore, are manufactured on the same production line as large passenger cars. These vehicles have a tray built into the vehicle's body and a single row of interior seats. The other kind of vehicle in this segment, the cab chassis ute, typically has the tray fitted on the rear of the chassis and has a higher ground clearance. These vehicles include the Ford Ranger, Holden Colorado, Mazda BT-50, Mitsubishi Triton, Nissan Navara and Toyota HiLux.
Compact SUVs
Compact SUVs have between four and six cylinders, and are generally built on a smaller chassis than regular SUVs. This segment has grown as a share of industry revenue over the past five years as compact SUVs tend to be more fuel-efficient than regular SUVs and large passenger cars. Popular compact SUVs include the Mazda CX-3, Honda HR-V, Holden Trax, Mitsubishi ASX, Nissan QASHQAI and Subaru XV.
Medium passenger cars
Medium passenger cars have four- to 12-cylinder engines, with passenger capacities ranging from two to five people. Body designs include sedan, hatch and wagon. This segment has fallen as a share of industry revenue over the past five years as consumers have moved towards SUVs. Medium passenger cars include the Kia Optima, Mazda6, Nissan Altima, Subaru Liberty and Toyota Camry.
Commercial vehicles
Commercial vehicles include light and medium vans and buses. Dealer sales of commercial vehicles are primarily made to small businesses and sole traders. Large businesses typically operate vehicle fleets and are more likely to buy from a wholesaler. This segment has grown as a share of industry revenue over the past five years. Favourable tax incentives for small business, such as accelerated depreciation schedules, have made vehicle purchases more affordable. Popular vehicles in this segment include the Toyota HiAce, Hyundai iLoad, Volkswagen Transporter and Mitsubishi Rosa.
Large passenger cars and other vehicles
Large passenger cars have six- to 12-cylinder engines. These cars carry a maximum of five passengers over a long wheelbase, in sedan and wagon body designs. This segment has lost market share to SUVs and more fuel-efficient vehicles over the past five years, due to large cars' high fuel consumption, which increases running costs. Large cars include the Chrysler 300, Holden Commodore and Toyota Aurion.
The industry sells several types of other vehicles, including people movers and sports cars. People movers have a wagon body with capacity for seven or more passengers and include vehicles such as the Honda Odyssey, Kia Grand Carnival and Toyota Tarago. People movers have lost market share over the past five years due to their high fuel consumption, and the increased functionality and popularity of large SUVs.
Sports cars have coupe or convertible bodies, and can carry between two and four passengers. Sports cars tend to have an engine with up to 12 cylinders. The sports cars segment has remained stable as a share of industry revenue over the past five years, as introducing the attractively priced Toyota 86 and Subaru BRZ has renewed consumer interest in these types of vehicles. Although sports cars have remained stable as a share of revenue, the falling market shares of people movers and large passenger cars have caused the overall product segment to decline as a share of industry revenue over the past five years.
After-sale service
Many industry participants also offer after-sale services, such as routine vehicle maintenance, repair servicing, and analytical testing. After-sale services are the most profitable services offered by industry participants, as providing these services requires considerable knowledge. This segment has increased as a share of industry revenue over the past five years. Dealer incentives, such as fixed price servicing, have helped attract consumers and boosted revenue derived from this segment. Furthermore, the greater integration of computer technology in new cars typically requires specific dealer knowledge to service. Vehicle manufacturers can control the information flow, delaying access by non-dealer repairers to technical information required to service new motor vehicles.
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Demand Determinants
Demand for motor vehicles largely depends on the ability and willingness of consumers and businesses to purchase big-ticket items.
Demand increases when motor vehicles are less expensive to purchase or when economic conditions improve. Motor vehicle affordability plays a major part in determining demand. Measured by the motor vehicle price index, the affordability of purchasing new vehicles can change due to reduced manufacturing costs, the removal of trade barriers and exchange rate fluctuations. When vehicles are more affordable, consumers are more inclined to purchase a vehicle or upgrade to a superior model. Consumers' ability to purchase vehicles is also determined by household discretionary income. When consumers have greater available funds after essential everyday expenses, they have more money to put towards a car, generating greater demand for the industry.
The willingness of households to purchase motor vehicles is primarily determined by consumer sentiment. Improved consumer sentiment indicates a stronger view of household finances and a more positive economic outlook. When consumers have strong finances and greater perceived certainty in future income streams, they are more willing to purchase motor vehicles. In contrast, negative consumer sentiment can push consumers towards holding on to their existing vehicles, or purchasing a used vehicle from a private seller. Similar to consumers, businesses' willingness to purchase new vehicles for their fleet is largely determined by business confidence. When business confidence is positive, there is more certainty in future revenue and profitability, making businesses more willing to invest in new fleet vehicles and so increasing industry demand.
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Major Markets
The major markets for motor vehicle dealers are private customers, corporate customers and government customers.
Private customers make up the industry's largest market as many business and government customers bypass dealers and source motor vehicles directly from wholesalers and manufacturers, particularly when these customers have pre-existing relationships with suppliers.
Private customers
Private customers are the industry's largest market. In terms of private sales, younger people (aged 25 and under) typically buy cheap vehicles, which are often older used cars. Discretionary income for these customers is low, but their need for transport is high. Couples and families, another sub-segment, are the largest buyers of motor vehicles. These customers typically do not purchase high-end vehicles, but they can have multiple cars as they require greater transport flexibility. Sales to private customers have risen over the past five years, in line with the increasing popularity of small cars and SUVs. However, given these vehicles generate less revenue per unit, this market has declined as a share of industry revenue over the past five years.
Business customers
Business customers purchase a range of vehicles to suit the specific needs of their business. While large businesses typically purchase vehicle fleets, small businesses and sole traders often purchase single vehicles. Larger businesses making fleet purchases directly from wholesalers or manufacturers, bypass the retail level of the supply chain. These fleet purchases are excluded from the industry. Business customers include general businesses, car-rental companies and taxi operators. Business customers have risen as a share of revenue over the past five years, due to growing demand from the construction and agriculture sectors. This demand has contributed to utility vehicles such as the Toyota HiLux and Ford Ranger consistently ranking among the highest selling vehicles over the past five years. Growing demand from the mining sector is anticipated to further contribute to this trend over the next five years.
Government and other customers
The government sector includes public administration, and other customers acquiring new vehicles from motor vehicle dealers. However, sales to this market are small as the government sector often purchases vehicles through new car wholesalers. The sector still plays an important role in the automotive sector as government customers support the shift to greener vehicles. Budgetary pressure and an effort to reduce unnecessary government expenditure have contributed to this segment declining as a share of revenue over the past five years.
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International Trade Exports in this industry are Low and Steady
Imports in this industry are Low and Steady
Imports and exports of motor vehicles are accounted for at the manufacturing level. As imports have been increasing in the Motor Vehicle Manufacturing industry over the past five years, this has also exposed Australian dealerships to trends in international trade. Over the period, growth in international trade has been driven by reduced tariffs on vehicles sourced from major trade partners and a shift in consumer demand towards more fuel-efficient, imported vehicles. Import penetration at the manufacturing level is expected to become even greater over the next five years, due to the exit of domestic car manufacturers.
Business Locations
The distribution of enterprises in the Motor Vehicle Dealers industry generally follows the distribution of Australia's population. New South Wales, Queensland and Victoria are Australia's three largest states in terms of population and combine to make up the vast majority of motor vehicle dealing enterprises. With New South Wales and Victoria accounting for over 55% of motor vehicle dealers in Australia. While New South Wales is slightly under-represented compared with its population share and Victoria is roughly in line with its population distribution, Queensland is over-represented.
Victoria has long been the centre of Australia's automotive industry, evident in the head offices of Australia's passenger motor vehicle manufacturers being located in the state. Queensland is over- represented and growing in terms of number of enterprises, servicing a more dispersed population. Motor vehicle dealers aim to locate themselves close to their major market. Consequently, states that have smaller populations are generally under-represented. States like South Australia, Western Australia and Tasmania have a far smaller market for wholesalers.
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Competitive Landscape Market Share Concentration
Concentration in this industry is Low
The Motor Vehicle Dealers industry exhibits low market share concentration. The industry has many dealerships servicing the new and used car markets in Australia, and the four largest players account for considerably less than 40% of industry revenue. Market share concentration has remained steady over the past five years, but is anticipated to rise over the next five years. As the larger industry players continue to acquire competitors and smaller dealerships over the next five years, their rate of expansion is anticipated to exceed that of the industry, leading to an increase in their market share. However, the many small, independent dealers that compete primarily in a limited geographic market will likely constrain a rise in concentration.
Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
Provision of superior after-sales service: Motor vehicle dealers that can provide reliable services to meet warranty agreements are more likely to maintain customer loyalty and encourage word-of-mouth recommendations.
Guaranteed supply of key inputs: Dealers that have reliable sources of vehicles can stock their showrooms with up-to-date models, helping to attract customers and generate improved stock turnover.
Production of premium goods/services: Dealers that offer quality vehicles and impeccable after sales service tend to achieve higher overall sales. This is true for both new and used car dealers.
Superior financial management and debt management: Dealers that manage cashflow effectively are more likely to survive periods when sales revenue is low.
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Cost Structure Benchmarks
Profit
Average industry returns are modest. A high-volume and low-margin business plan typically characterises motor vehicle dealers. Industry profitability has fallen over the past five years, as consumer preferences have trended towards low-margin, cheaper vehicles. Meanwhile, price competition among industry participants has been ongoing, as larger players have worked to increase their market share. The depreciating Australian dollar has also made purchasing cars from overseas more expensive, which has further limited profit margins. However, the increasing popularity of higher margin utility vehicles, such as the Toyota HiLux and Ford Ranger, has limited the decline in profitability.
Wages
Wage costs account for a small proportion of industry revenue, largely due to the magnitude of purchase costs and the high value of motor vehicles sold. For larger companies, effective management techniques
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that reduce staff turnover and improve productivity can lead to lower employee expenses. Wages are particularly important for companies that offer dealer-provided vehicle servicing. Wage costs have increased marginally as a proportion of industry revenue over the past five years as existing workers, particularly those in commission-based sales roles, have been awarded a higher average wage.
Purchases
Purchases represent the industry's largest cost segment. Purchasing cars from wholesalers and manufacturers represents the bulk of purchase costs for dealers. Materials and components used to recondition used cars are also included in this category. While industry participants have benefited from the removal of tariffs through free trade agreements with key trading partners, the depreciation of the Australian dollar has caused purchase costs to rise as a share of industry revenue over the past five years.
Depreciation
Depreciation costs are low due to the minimal equipment required to operate in the industry, particularly in proportion to the value of sales. Depreciable items include software, computer technology, communications and office equipment, and property, plant and equipment. Depreciation costs have increased as a share of industry revenue over the past five years, as firms have increased capital spending to promote efficiency, reduced non-essential labour and improved management of their supply chain connection with wholesalers.
Other Costs
Other expenses include rent, utilities, advertising costs and insurance premiums. Rent and utilities have remained stable as a share of industry revenue over the past five years. Advertising expenses are high, as distributors and wholesalers work with manufacturers to determine new model releases and promotions for the Australian market. Furthermore, the industry's competitiveness means that dealers need to differentiate themselves from one another, which raises advertising costs. Other costs include other management expenses, administration costs, and security expenses.
Basis of Competition Competition in this industry is High and Increasing The Motor Vehicle Dealers industry exhibits a high level of competition.
Dealers compete on the basis of product range, price, branding and location. Dealers can also gain a competitive edge by providing quality service, after-sales assistance and financing. Outside the industry, dealers face competition from private sales and direct business purchases from a manufacturer or wholesaler.
Internal competition
Internal industry competition is largely based on a dealer's product range. Consumers, businesses and government entities typically seek out a particular vehicle in a specific segment. A product range that consists of popular and in-demand vehicles generates greater business for a dealership. Branding of the dealership often plays an important role in this regard. When consumers choose the type of vehicle they want, they are generally limiting their scope to particular vehicle models. Affiliation with popular vehicle brands like Toyota and Mazda provides an advantage to some dealerships.
Price is also an important basis of competition and becomes more crucial in the used vehicle segment. Price is important to consumers and they often shop at numerous dealers to get the best deal. Selling vehicles at low prices and providing value for the consumer gives some dealerships a competitive edge.
Being near to target markets expands the potential client base for motor vehicles. Motor vehicle dealers can then gain an edge by providing superior customer service, including after-sales assistance that generates repeat business. They can also provide in-house financing to assist consumers in making their purchases. Dealers also offer incentives to attract customers, such as fixed or capped price servicing and long-term warranties.
External competition
While alternative modes of transport present an indirect form of external competition, the main competition for motor vehicle dealers comes from private sellers. These are consumer-to-consumer used vehicle sales that bypass dealerships. Online aggregator websites such as carsales.com.au have made private sales easier and more convenient over the past five years, which has facilitated stronger demand for private sales. For new vehicle purchases by businesses, some manufacturers and wholesalers deal directly
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with the customer, bypassing dealerships and acting as a form of external competition.
Barriers to Entry Barriers to entry in this industry are Medium and Steady The Motor Vehicle Dealers industry is characterised by moderate
barriers to entry.
Many dealerships are operated under franchise agreements, which can act as a barrier for potential entrants to the industry, as franchisors are able to decide when, where and if further franchise agreements are granted. Sales targets and performance measures may also apply in franchise agreements, which can make it difficult for prospective franchisees to enter the industry.
The costs of entry into franchises can also restrict entry of new industry operators. There are also strict equity requirements from motor vehicle manufacturers. Once the brand affiliation is finalised, establishing a new vehicle franchise rather than entering an existing franchise arrangement can represent a significance cost. Most of this cost is associated with stock purchases and site development. For used car dealerships, the barriers to entry are substantially lower, as facilities are generally of a lower standard and the price of stock is reduced. However, there remains a significant cost to buy or lease premises that generate strong customer traffic.
Barriers to Entry Checklist
Competition High
Concentration Low
Life Cycle Stage Mature
Technology Change Medium
Regulation & Policy Medium
Industry Assistance Low
Industry Globalization
Globalization in the industry is Low and the trend is Steady
The Motor Vehicle Dealers industry exhibits a low level of globalisation. There is no international trade in the industry as trade in motor vehicles is accounted for at the manufacturing level. There is also no notable foreign ownership in the industry. While most motor vehicles sold by the industry are imported and many dealers sell solely imported vehicles, dealerships are generally locally and privately owned and have a licence to sell such vehicles.
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Major Companies Major Players
Automotive Holdings Group Limited
Market Share: 9.9%
Automotive Holdings Group Limited (AHG) is an Australian public company established in 1952. After being listed on the Perth Stock Exchange in 1955, the company was privatised in 1980. AHG remained privately owned until 2005, when it was listed on the ASX to benefit from stable market conditions. The company operates across two core business lines: automotive retailing and logistics.
AHG participates in the industry through its automotive retailing segment, which includes new and used car sales and servicing. AHG also generates automotive-related revenue through spare parts sales and vehicle financing, which is excluded from the industry. AHG operates over 100 dealership locations in Australia and New Zealand. The company's dealership franchise sites are primarily located in Western Australia, New South Wales, Victoria and Queensland. AHG is the largest automotive car retailing company in Australia.
When acquiring dealerships, the company's aim is to attract customers through creating car-retailing hubs with different branded dealers located close to one another. AHG has invested in two greenfield developments and has continued to acquire existing dealerships. For example, the company has made several acquisitions in Victoria over the past five years, including the Nissan and Kia and Jaguar Land Rover in Essendon Fields, Daimler Trucks dealership in Laverton, Lance Dixon Group in Doncaster and Knox Mitsubishi dealership in Wantirna South, to create a strong presence in Victoria's Greater Melbourne area. The company has also acquired five new dealerships from Hunter Motor Group in New South Wales. AHG expanded its footprint in the used car sales segment by investing in easyauto123, which opened two new warehouses for fixed price used cars located at Brooklyn, Melbourne and Hendra, Brisbane.
Financial performance
AHG's industry specific revenue is expected to grow at an annualised 8.9% over the five years through 2018-19 to $5.9 billion, strongly outperforming the overall industry. While part of the company's growth has been due to rising demand for new passenger vehicles, AHG's aggressive expansion through acquisition activity has significantly contributed to its expanding market share over the past five years. AHG has acquired numerous established dealership franchises across Australia and New Zealand over the period, leading to significant revenue growth. AHG's profit margins have also grown, as the company has generated economies of scale through its expanded dealer network and higher overall sales volumes.
A P Eagers Limited
Market Share: 6.5%
A.P. Eagers Limited is an Australian public company. The company formed from the 1992 merger of A.P. Group Ltd and E.G. Eager & Son Pty Ltd, the latter of which was founded in Brisbane in 1913. The company has since grown and increased its franchise numbers through numerous acquisitions. A.P. Eagers' dealerships sell new cars, used cars, spare parts and provide financing and car servicing, with dealerships located across Victoria, Queensland, New South Wales, the Northern Territory and South Australia and Tasmania. The company operates in the industry through its new and used car retailing and servicing business segments.
A.P. Eagers has pursued an aggressive acquisition strategy to grow its business over the past five years. Some of the company's most recent acquisitions include Birrell Motors Group, Tony Ireland Group and Crampton Automotive Group. These acquisitions have helped the company expand its size and market share faster than it would have achieved solely through organic growth. The company is headquartered in Fortitude Valley, QLD.
Financial performance
A.P. Eagers' industry-specific revenue is expected to grow at an annualised 9.5% over the five years through December 2019, to $3.9 billion. This trend represents an outperformance of the overall industry
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over the same period. As a result, A.P. Eagers has increased its market share. A.P. Eagers' acquisition strategy has contributed to the company's strong revenue growth over the past five years. Greater economies of scale achieved through its larger dealer network have also enabled the company to increase its profit margins.
Other Players Patterson Cheney Holdings Pty Ltd
Market Share: 2.0% Brand Names: Patterson Cheney Cars and Trucks Patterson Cheney Holdings Pty Ltd is an Australian-owned car and truck retailer. The company has been
operating in the industry since 1915. The company's head office is in Dandenong, VIC and its brands retailed include Honda, Holden, Isuzu, Toyota, Mercedes-Benz and Western Star Trucks.
Suttons Motors Pty Ltd
Market Share: 2.0% Brand Names: Suttons Suttons Motors commenced operations in Homebush, NSW, in 1948. Since then, the Sutton family has
expanded operations under the Suttons brand and has gained an interest in, or ownership of, many dealerships, including Scuderia Veloce Motors, Western Toyota and Mosman Toyota. The company has 47 car and truck dealerships across New South Wales.
Autosports Group
Market Share: 1.0% Autosports Group is an Australian listed company that sells luxury and prestige cars. The company
commenced operations in a greenfield site through establishing Audi Autosports Dealership in 2006. Autosports Group has 37 car dealerships across NSW, Queensland and Victoria.
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Operating Conditions Capital Intensity The level of capital intensity is Low The Motor Vehicle Dealers industry displays low capital intensity. In 2018-19, for every dollar spent on
wages, industry firms invest an estimated $0.05 in capital investment. Retail industries are typically labour- intensive as staff are required to make sales and carry out administrative tasks. Skilled salespeople can generate significant business activity for dealers and are often paid commission, benefiting from greater sales. However, due to growing demand for new cars over the past five years, industry operators have reinvested in their facilities, increasing capital intensity.
Dealers that sell new vehicles tend to have substantially higher capital intensity than those that sell only used vehicles. Dealers predominantly selling new vehicles tend to invest heavily in their facilities to appeal to prospective customers. Apart from investment in buildings, fixtures and fittings, the Motor Vehicle Dealers industry is not particularly capital-intensive.
Potential Disruption
Rate of Innovation: High
A ranked measure for the number of patents assigned to an industry. A faster rate of new patent additions to the industry increases the likelihood of a disruptive innovation occurring.
Innovation Concentration: Low
A measure for the mix of patent classes assigned to the industry. A greater concentration of patents in one area increases the likelihood of technological disruption of incumbent operators.
Ease of Entry: Moderate
A qualitative measure of barriers to entry. Fewer barriers to entry increases the likelihood that new entrants can disrupt incumbents by putting new technologies to use.
Rate of Entry: Low
Annualized growth in the number of enterprises in the industry, ranked against all other industries. A greater intensity of companies entering an industry increases the pool of potential disruptors.
Market Concentration: Moderate
A ranked measure of the largest core market for the industry. Concentrated core markets present a low- end market or new market entry point for disruptive technologies to capture market share.
The industry has a high rate of new patent technologies but limited concentration. This higher rate of new technologies creates a greater pool of potential disruptors. The range of patenting technologies is broad, which limits the threat of disruptions niche areas. A lack of concentration in patent types creates an environment where incumbent companies are more likely to have sustaining innovations in more areas.
Industry operators are exposed to a low rate of new entrants and a moderate level of entry barriers. This combination of factors creates an environment where entry trends are not a key threat of disruption.
Technological Disruption in the Motor Vehicle Dealers in Australia Industry
Technology disruption has affected the Motor Vehicle Dealers industry over the past decade. Motor vehicle dealers are operating in an increasingly disrupted environment. The rise of digital platforms such as carsales, motorscout and private fleet is drastically changing the way consumers purchase vehicles. Customers can quickly and easily access information through mobile devices, anytime and anywhere. Third-party digital channels (for example, caradvice, carshowroom, and carsguide) are increasing vehicle pricing transparency by allowing consumers to make product comparisons, limiting motor vehicle dealers' ability to influence customers' purchase behaviour, subsequently preventing dealers from selling new vehicles with higher profit margins. Similarly, used-car retailing is also rapidly digitising as new entrants (such as, carsales, Pickles and Autotrader) uses price-competitive business models that simplify buying and selling experience for consumers.
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Another area for technological disruption is the rise of ride-sharing services (for example, Uber, didi and Ola) and private-car sharing services (for example, Flexicar and GoGet). Over the past five years, ride- sharing and private-car sharing services have grown exponentially. The convenience of hailing a ride by tapping on a smartphone app and paying the fare electronically has prevented consumers living in dense urban areas to own a car. Similarly, private-car sharing services has also affected motor vehicle dealers. Over the next five years, it is anticipated that motor vehicle dealers will shift from product-driven approach to customer-centric approach to drive customer loyalty and to adapt to changing customer behaviour. To compete with online channels, motor vehicle dealers are likely to adopt multi-channel approach, such as direct online sales, flagship stores and pop-up stores, on top of the traditional brick-and mortar approach.
Technology & Systems
The level of technology change is Medium
The Motor Vehicle Dealers industry exhibits a medium level of technological change.
Motor vehicle dealerships use computerised systems to process sales and expenditure information. If the dealership is involved in motor vehicle servicing, then electronic diagnostic equipment is used to isolate mechanical or electrical faults. In addition, dealers that offer vehicle servicing often maintain a computerised inventory of parts and accessories.
Dealers use the internet to increase sales traffic and profitability. Many dealers also use the internet to cut various marketing, advertising and sometimes personnel costs. While this has increased profitability, internet use for the industry has become mature, limiting any significant potential for further gains. Many sales begin through consumers browsing online aggregator websites like carsales.com.au. Dealers have to advertise on aggregator websites to promote stocked vehicles to a wider audience of potential customers, although these websites often charge a fee to the dealer for each enquiry originating online.
Most dealers make further use of the internet by enhancing their brands with corporate websites. This helps build the dealership's profile by developing customer awareness of dealer locations, products and services. Some firms have also introduced online car selection services. This allows potential customers to email dealerships to request a vehicle test drive, and to browse and even purchase vehicles from home. One such example is Tesla, which has physical stores displaying the vehicles and where test drives can be organised, but the final transaction when purchasing the vehicle is conducted online.
Revenue Volatility The level of volatility is Medium
The Motor Vehicle Dealers industry exhibits a moderate level of revenue volatility. The discretionary nature of purchasing motor vehicles contributes to volatility, although the used car segment adds a degree of stability as consumers can purchase less expensive older models. In addition, the cyclical introduction of new models and the demand for vehicles determines sales volumes. Model run-out times and end-of-year and end-of-financial-year sales can also add to industry volatility.
Economic conditions and events overseas also affect car retailers' revenue. For example, changes in the world price of crude oil influence domestic petrol prices. If fuel prices rise, consumers may purchase less expensive smaller vehicles or drive existing vehicles less, reducing wear and tear and delaying vehicle upgrades. Revenue volatility is expected to gradually decline over the next five years due to more stable economic conditions.
Regulation & Policy The level of regulation is Medium and Steady
The Motor Vehicle Dealers industry is characterised by a medium level of regulation and policy. All states impose a motor vehicle trading licence on dealerships, and this is regulated by the respective states. Licensing and registration of used motor vehicle dealers is now compulsory in all states and territories, provided they sell more than five vehicles per annum. The registration procedure means that an automatic vehicle warranty period applies based on the age of the vehicle and the number of kilometres on the odometer. For instance, a licensed car trader in Victoria must provide a statutory warranty if the car is not more than 10 years old and has travelled less than 160,000 kilometres. A statutory warranty lasts for three months or 5,000 kilometres, whichever occurs first.
Import restrictions, imposed to assist motor vehicle manufacturers, act as a form of regulation for dealers.
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Imported passenger vehicles incur a tariff duty of 5%, unless a free trade agreement is applicable to these vehicles. This rate was reduced from 10% on 1 January 2010. In addition to the percentage rate, there is a $12,000 flat tariff on used vehicles imported into Australia. Strong regulations regarding imported used vehicles aim to prevent a fall in new vehicle sales. However, there have been proposals to abolish the tariff on new imported vehicles, used vehicles which are right-hand drive, less than 12 months old and have an odometer reading of less than 500 kilometres.
Modern Slavery Act
In November 2018, the Federal Government passed the Modern Slavery Act 2018. The act, which came into force on 1 January 2019, is a new reporting requirement for larger Australian businesses. Companies that generate an annual consolidated revenue of at least $100.0 million will have to report on how they act to mitigate the risks of modern slavery in their operations and supply chains. The first reports will relate to 2018-19, with most reports being released in 2020. Businesses with consolidated annual revenue of at least $50.0 million in New South Wales will also have to operate under the NSW Modern Slavery Act 2018, which is set to come into force on 1 July 2019.
The Modern Slavery Act 2018 is expected to heavily affect the Motor Vehicle Dealers industry, as import penetration has risen due to the exit of domestic car manufacturers. The automotive manufacturing sector has a vast global footprint through production facilities that obtain raw materials and automotive parts across the globe. Under the new act, companies that source motor vehicles from overseas manufacturing operations in Asia-Pacific countries must take significant action to make sure that modern slavery is not found in their supply chains.
Industry Assistance The level of industry assistance is Low and the trend is Steady
The Motor Vehicle Dealers industry receives minimal assistance. Buyers of electric vehicles are currently exempt from paying stamp duty in the Australian Capital Territory to encourage uptake of environmentally friendly vehicles. While some other states, such as Victoria, provide a registration discount for hybrid vehicles to incentivise purchases.
The Australian Automotive Dealers Association (AADA) is the largest national body for franchised new vehicle retailers. All states and territories are represented on the AADA's board, along with a representative from Automotive Holdings Group and A.P. Eagers. The AADA works with the Australian Motor Dealer Council in representing motor vehicle dealers as a collective, organising industry events and developing policy pertaining to dealers. The AADA is entirely funded, organised and controlled by motor vehicle dealers.
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Key Statistics Industry Data
Revenue
($m) IVA
($m) Estab.
(Units) Enterprises
(Units) Employment
(People) Exports
($m) Imports
($m) Wages
($m) Domestic
Demand ($m) 2009-10 63,233 7,006 5,650 4,829 77,250 N/A N/A 5,122 N/A
2010-11 60,336 7,114 5,819 4,797 79,500 N/A N/A 5,370 N/A
2011-12 62,074 7,716 5,833 4,742 78,000 N/A N/A 5,711 N/A
2012-13 65,033 7,635 5,704 4,602 79,500 N/A N/A 5,658 N/A
2013-14 62,928 7,451 5,717 4,572 78,563 N/A N/A 5,601 N/A
2014-15 65,570 8,052 5,602 4,494 77,844 N/A N/A 6,032 N/A
2015-16 67,091 8,467 5,679 4,475 79,500 N/A N/A 6,246 N/A
2016-17 65,364 7,929 5,642 4,373 78,266 N/A N/A 5,922 N/A
2017-18 62,665 7,644 5,627 4,362 78,733 N/A N/A 5,881 N/A
2018-19 60,211 7,437 5,425 4,272 78,726 N/A N/A 5,684 N/A
2019-20 60,945 7,468 5,438 4,248 78,937 N/A N/A 5,720 N/A
2020-21 61,906 7,638 5,319 4,155 78,780 N/A N/A 5,986 N/A
2021-22 62,531 7,592 5,343 4,142 78,838 N/A N/A 5,972 N/A
2022-23 63,383 7,763 5,220 4,046 78,798 N/A N/A 6,168 N/A
2023-24 64,371 7,874 5,115 4,028 79,328 N/A N/A 6,308 N/A
Annual Change
Revenue
(%) IVA (%)
Estab. (%)
Enterprises (%)
Employment (%)
Exports (%)
Imports (%)
Wages (%)
Domestic Demand (%)
2009-10 1.89 -4.03 -6.97 -4.81 4.04 N/A N/A -5.50 N/A
2010-11 -4.59 1.53 2.99 -0.67 2.91 N/A N/A 4.84 N/A
2011-12 2.88 8.46 0.24 -1.15 -1.89 N/A N/A 6.34 N/A
2012-13 4.76 -1.05 -2.22 -2.96 1.92 N/A N/A -0.93 N/A
2013-14 -3.24 -2.42 0.22 -0.66 -1.18 N/A N/A -1.02 N/A
2014-15 4.19 8.07 -2.02 -1.71 -0.92 N/A N/A 7.71 N/A
2015-16 2.31 5.15 1.37 -0.43 2.12 N/A N/A 3.54 N/A
2016-17 -2.58 -6.36 -0.66 -2.28 -1.56 N/A N/A -5.19 N/A
2017-18 -4.14 -3.60 -0.27 -0.26 0.59 N/A N/A -0.69 N/A
2018-19 -3.92 -2.71 -3.59 -2.07 -0.01 N/A N/A -3.36 N/A
2019-20 1.21 0.41 0.23 -0.57 0.26 N/A N/A 0.64 N/A
2020-21 1.57 2.27 -2.19 -2.19 -0.20 N/A N/A 4.64 N/A
2021-22 1.00 -0.61 0.45 -0.32 0.07 N/A N/A -0.24 N/A
2022-23 1.36 2.25 -2.31 -2.32 -0.06 N/A N/A 3.28 N/A
2023-24 1.55 1.43 -2.02 -0.45 0.67 N/A N/A 2.27 N/A
Key Ratios
IVA/Revenue
(%)
Imports/ Demand
(%)
Exports/ Revenue
(%)
Revenue per Employee
($'000)
Wages/ Revenue
(%)
Employees per estab. (units) Average Wage ($)
2009-10 11.1 N/A N/A 819 8.10 13.7 66,302
2010-11 11.8 N/A N/A 759 8.90 13.7 67,547
2011-12 12.4 N/A N/A 796 9.20 13.4 73,217
2012-13 11.7 N/A N/A 818 8.70 13.9 71,167
2013-14 11.8 N/A N/A 801 8.90 13.7 71,288
2014-15 12.3 N/A N/A 842 9.20 13.9 77,495
2015-16 12.6 N/A N/A 844 9.31 14.0 78,567
2016-17 12.1 N/A N/A 835 9.06 13.9 75,665
2017-18 12.2 N/A N/A 796 9.39 14.0 74,699
2018-19 12.4 N/A N/A 765 9.44 14.5 72,197
2019-20 12.3 N/A N/A 772 9.39 14.5 72,469
2020-21 12.3 N/A N/A 786 9.67 14.8 75,989
2021-22 12.1 N/A N/A 793 9.55 14.8 75,754
2022-23 12.2 N/A N/A 804 9.73 15.1 78,281
2023-24 12.2 N/A N/A 811 9.80 15.5 79,524
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Additional Resources Australian Bureau of Statistics http://www.abs.gov.au
Australian Automotive Dealer Association http://www.aada.asn.au
Federal Chamber of Automotive Industries http://www.fcai.com.au
Industry Jargon CAB CHASSIS Vehicle with a body-on-frame design, where the cabin, or cab, is placed on a chassis with bare frame rails behind, allowing the consumer to modify the rear part of the vehicle.
PEOPLE MOVER Large vehicle with a wagon design that has the capacity to carry seven or more passengers.
SPORTS UTILITY VEHICLES (SUVS) Vehicles based on a wagon body style, which have a high ground clearance and are built on a light-truck chassis.
Glossary BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.
CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labour. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labour; medium is $0.125 to $0.333 of capital to $1 of labour; low is less than $0.125 of capital for every $1 of labour.
CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the 'real' growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the Australian Bureau of Statistics' implicit GDP price deflator.
DOMESTIC DEMAND Spending on industry goods and services within Australia, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT The number of permanent, part-time, temporary and casual employees, working proprietors, partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.
ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.
EXPORTS Total value of industry goods and services sold by Australian companies to customers abroad.
IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in Australia.
INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.
INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income,
Motor Vehicle Dealers in Australia June 2019
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and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry's contribution to GDP, or profit plus wages and depreciation.
INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%; medium is 5% to 20%; and high is more than 20%. Imports/domestic demand: low is less than 5%; medium is 5% to 35%; and high is more than 35%.
LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry's life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry's products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.
PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.
VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
WAGES The gross total wages and salaries of all employees in the industry. Benefits and on-costs are included in this figure.
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- About IBISWorld
- Contents
- Legend
- About This Industry
- Industry Definition
- Supply Chain
- Major Players
- Main Activities
- The primary activities of this industry:
- The major products and services in this industry:
- Similar Industries
- Related International Reports
- At a Glance
- Key Statistics Snapshot
- $60.2bn
- -0.9%
- 1.4%
- 2.4%
- 9.4%
- -1.3%
- Key Trends
- SWOT in the Industry
- Strengths
- Weaknesses
- Opportunities
- Threats
- Executive Summary
- The Motor Vehicle Dealers industry has had a bumpy ride over the
- Industry Structure
- Key Industry Data
- Major Players
- Products & Services Segmentation
- Industry Performance
- Key External Drivers
- Current Performance
- Operators in the Motor Vehicle Dealers industry have faced volatile
- Industry Data Timeseries
- Industry Outlook
- Revenue for the Motor Vehicle Dealers industry is projected to grow
- Industry Life Cycle
- Products & Markets
- Products & Services Segmentation
- The Motor Vehicle Dealers industry's product segmentation reflects
- Demand Determinants
- Demand for motor vehicles largely depends on the ability and willingness
- Major Markets
- The major markets for motor vehicle dealers are private customers,
- International Trade
- Business Locations
- Competitive Landscape
- Market Share Concentration
- Key Success Factors
- Cost Structure Benchmarks
- Basis of Competition
- The Motor Vehicle Dealers industry exhibits a high level of competition.
- Barriers to Entry
- The Motor Vehicle Dealers industry is characterised by moderate barriers
- Industry Globalization
- Major Companies
- Major Players
- Automotive Holdings Group Limited
- A P Eagers Limited
- Other Players
- Patterson Cheney Holdings Pty Ltd
- Suttons Motors Pty Ltd
- Autosports Group
- Operating Conditions
- Capital Intensity
- Potential Disruption
- Technology & Systems
- The Motor Vehicle Dealers industry exhibits a medium level of technological
- Revenue Volatility
- Regulation & Policy
- Industry Assistance
- Key Statistics
- Industry Data
- Annual Change
- Key Ratios
- Additional Resources
- Industry Jargon
- Glossary
