Ford, Holden, and other major automakers saw Australia sales slump dramatically in the past month – and they're blaming new tax law for their troubles.
Initiated on July 16, the "Fringe Benefits Tax" (FBT) changed the tax on personal use of company cars from a simple 20% rate to a new structure requiring a detailed submission of log books.
Ford sales dropped off 20% in August, while Holden headed 6% lower and Toyota dipped 1%. In an interview with News Corp, Ford spokeswoman Sinead Phipps said "[t]he proposed FBT changes have had an effect on the entire industry. We've already taken action to match production to demand."
Ford added 12 production down days in August and September, while Holden's forecast for 2800 Commodores delivered in August proved overly optimistic.
Foolish takeaway
Employees and companies can't hold off on buying cars forever – but this latest tax could change how and how many vehicles they decide to roll off the lot. That could mean major changes for leasing companies like McMillan Shakespeare (ASX: MMS), as well as automotive sales companies like A.P. Eagers (ASX: APE) and Automotive Holdings Group (ASX: AHE).
But rather than being lauded as closing an annoying legal loophole, the new FBT is hitting major resistance. Aussie automakers are first in line, since up to 70% of locally-manufactured vehicles are bought as part-time or full-time company cars. But the biggest backlash may come from the government itself. According to an Australian Salary Packaging Industry Association study, more than 80% of drivers with company-oriented cars are actually employees of – you guessed it – the government.
With so much uncertainty over both the FBT's implications and its political permanence, long-term investors would be wise to stick to their holdings. At this point, this latest tax isn't a game changer for companies with a competitive edge and sustainable value add.
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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.
