Imports swamp new car sales

Car recalls are not helping an industry still reeling from the recession. New vehicle sales in New Zealand last year were down 28 per cent on 2008.

This year the industry expects a modest 5 per cent rise in new car sales. In the second-hand market, a shortage of late-model used cars is raising prices.

The United States and Europe are also in clawback mode.

US sales fell to 10.4 million last year, well below the usual 16 million. European sales were down 1.6 per cent to 14.5 million, buoyed only by government cash-for-clunker schemes that have started to phase out. This has left the world with an excess of 30 million cars.

David Vinsen, chief executive of the Imported Motor Vehicle Industry Association, believes the wall of cars will put "huge pressure on margins", but the overcapacity will not necessarily last. "They're not just going to keep on pumping out vehicles if they can't sell them."

But the pressure may stay on as emerging economies ramp up their own production. China has overtaken the US to become the world's largest single-country car market, with sales surging 45 per cent to 13.6 million last year.

Mr Vinsen says India is unlikely to be a big car exporter – "they've got a huge domestic market to deal with, but China certainly is".

Chinese cars are already in New Zealand. A few hundred Great Wall utes and commercial vehicles have been imported and China's Geely passenger cars are on their way. Cars from India and Malaysia are also being brought in privately.

Liz Dobson, editor of Autofile magazine, says China is trying to keep standards high by limiting exporters. Although Great Wall only has a two out of five star safety rating in New Zealand, Geely has four stars.

"The whole industry is looking to China for safety but the government is keeping a close eye on who can export."

The Chinese cars are expected to be cheap enough to give used cars a run for their money. Mr Vinsen said the first batch has had problems "in terms of design, and quality of build, and probably backup, but they're leading it with price points and marketing and there's no question that they're going to be a force in the future".

So will buying a car in the future be like buying a plasma television today? Liz Dobson says no, not for at least a decade because of new markets in Russia and eastern Europe.

Mr Vinsen says yes.

"That's already happening now. New Zealand has some of the cheapest used cars in the world. It's a hugely competitive market, with very low margins, and as soon as the price of new vehicles go up, it gives the opportunity for used-vehicle importers to bring in later-model vehicles to undercut it.

"There's a fantastic dynamic there to keep everybody honest and make sure the consumers get really competitively priced vehicles."

This dynamic is fuelled by the fact that New Zealand has a high proportion of used imports, unlike other countries which still make their own.

Clive Matthew-Wilson, editor of the Car Buyers Dog and Lemon Guide, thinks that not only will prices come down, but within the next five years, most cars will be sold over the internet.

Turners Auctions recently switched all its advertising to the internet and has found profits have rebounded.

The advent of Trade Me has also helped, and Mr Matthew-Wilson estimates that 15 per cent of all cars listed online are sold sight unseen.

Asked what the future holds, David Vinsen believes there will be greater tension between those who want to meet the growing demand from consumers in developing countries, and those who seek to curb it.

"There's environmental concerns and pressure on for improved public transport to try and reduce the proliferation of vehicles but people want independent driver transport, and the pressure's going to continue for that."

- © Fairfax NZ News