The Motley Fool

SUVs drive new car sales

It seems the trend of consumers happy to lash out on a new car, but baulk at walking into our retailers, continues.

New car sales have jumped 18% compared to the previous year, and yet again sports utility vehicles (SUVs) have been at the forefront of the rise, according to data from the Australian Bureau of Statistics (ABS).

SUVS continued their barnstorming run, rising 5.8% in December over the previous year. Sales of passenger vehicles rose just 1.2%, while sales of other vehicles inched upwards by 0.2%.

Toyota retains first place with 22.2% of the market, followed by Mazda with 10.0%, overtaking Holden with 9.1%. Ford has just 8% of the market, and languishes in fifth place, behind Hyundai.

For companies like ARB Corporation (ASX: ARP) and CMI Limited (ASX: CMI) – who supply accessories for 4WDs, like bull bars, canopies and snorkels – the continued rise in SUV sales should be a boon for their business.

Sales of new cars in general should also be good for motor dealerships, Automotive Holdings (ASX: AHE) and AP Eagers (ASX: APE).

Continuing poor passenger car sales comes as News media reports that Ford’s Falcon and Holden’s Commodore will be phased out in 2016. According to the report, Holden boss Mike Deveraux has told journalists that the VF Commodore will run through to the end of 2016. The report suggests Holden plans to build a smaller passenger car from 2017, although the continued popularity of SUVs, meant Holden was re-evaluating its plans.

Ford has not outlined its plan for beyond 2016, but has ruled out an SUV, a small car and a ute. Parts suppliers are reported to believe that Ford will close its manufacturing operations in Australia, because they haven’t been asked to quote on future models.

In 2012 – a record sales year – Ford recorded its lowest annual output since 1960, when the Broadmeadows factory opened.

The Foolish bottom line

High labour costs and the strong Australian dollar means tough times loom for our manufacturing industry, which reportedly employs more people than the resources sector.

It seems locally produced cars will become a thing of the past within a few years, despite record sales of cars in Australia.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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