Expert predicts bloodbath in the New Zealand car industry

A third of New Zealand’s car dealers could go out of business in the next 18 months, says a leading car industry commentator.

Clive Matthew-Wilson, editor of the car buyers’ Dog & Lemon Guide, says:

“Sales of new cars for private use were down more than 16% on the same month last year in August, while new commercial vehicle sales were down almost 23%. Used car registrations were down 39% compared to a year ago,”

“ In addition to the recent collapse of many key local finance companies, we have a meltdown of the world’s financial markets. The surviving finance companies are increasingly cautious about who they loan money to.”

“If cars dealers can’t offer hire purchase finance, they can’t sell cars. If they can’t sell cars, they go out of business.”

Matthew-Wilson says the banks are also squeezing car dealers: in order to have cars sitting on a yard, the dealer has to borrow money from a bank to buy them. Borrowing money from banks is becoming increasingly difficult.

“Dealers at the top and bottom of the market are the most vulnerable. Luxury cars and European cars tend to be purchased during boom times. In times of uncertainty, customers tend to go for affordable and reliable cars rather than exotic ones.”

“Dealers who target the poor and gullible will also go to the wall because their customers generally can’t get finance anymore.”

“It’s hard to pick the exact percentage of dealers who will be put out of business: it will be 10%, it will probably be 20%. It may be 30%.”

Matthew-Wilson adds that a weakening global market will force the major car companies into a price war, meaning that the price of some new cars will drop dramatically.

“Ford and General Motors are both on life-support and it’s highly likely that they’ll be forced to close down their Australian assembly operations in the near future.”

Matthew-Wilson says second hand cars will have to drop in price in response to the dropping prices for new cars and because demand for second hand cars will weaken.

“Whereas a couple of years ago people enjoyed shopping for a replacement car, now they’ll hang onto whatever they’ve got and they won’t replace it until they have no choice, This will cause a sudden dip in demand which will see many dealers go to the wall.”

“The one piece of good news is that there will be bargains galore for those consumers with money. Everybody else is just going to have to tighten their belts.”