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New car sales rise

It seems consumers aren’t just heading into retail stores, but are also visiting car showrooms, with news out today that sales of new cars rose 5.2% in February compared to the previous year.

The Australian Federal Chamber of Automotive Industries VFACTS report shows sales of new vehicles in February were 90,218, with SUVs (Sport Utility Vehicles or 4WDs) continuing to take market share, with a 14.2% rise in sales.

Sales of passenger vehicles have continued their decline, falling 5.6% compared to February 2012. Medium and large passenger cars were the hardest hit, falling 26.6% and 28.1% respectively. SUVs now account for 30.4% of all vehicles, with passenger vehicles hanging onto its majority share of 48.6%. Commercial vehicles, which include buses and vans, make up the remaining 21%.

Ford and Holden losing market share

Toyota has retained first place on the sales ladder with 17.8% of the market, followed by Mazda with 9.7% and Nissan in third place with 9.1%. Holden has been pushed into fourth spot with 8.5%, closely followed by Hyundai at 8.3%. Ford has just 7.3% of the market, and none of its vehicles feature in the top ten selling cars.

The Mazda 3 was again the top selling vehicle, followed by the Toyota Hilux, Corolla, Nissan Navara and the Mitsubishi Triton. Three of those vehicles are light commercial vehicles.

The high Australian dollar is keeping imported car prices low, and consumers may also have been attracted by dealerships and car manufacturers offering low or no interest loans for vehicles. It seems investors have also been attracted by rising car sales.

Australia has two motor dealerships listed on the Stock Exchange, AP Eagers Limited (ASX: APE) and Automotive Holdings (ASX: AHE), both with a market cap of around $1 billion. Both stocks have comprehensively outperformed the S&P/ASX 200 Index (INDEX: ^AXJO) (ASX: XJO) over the past year, rising 101% and 75% respectively. The index has risen a comparatively low 19.3% since March 2012.

However, Foolish investors should note that both companies boast profit margins of less than 2%, and net debt to equity levels of over 120%. It wouldn’t take much of a speed bump to trip these companies up. Trading on P/E ratios of over 18, both look priced for perfection.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, 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.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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