When declining new vehicle sales became a crisis

New vehicle sales are often regarded as a good barometer of the economy.  

As at November 2019, new vehicle sales in Australia were down 8.2% on 2018 figures, the worst figures since 2011. (https://www.caradvice.com.au/811764/vfacts-november-2019-sales-results/). The overall 2019 figures are unlikely to be any better as consumers and government reduce purchases.

As 2019 becomes 2020, 2019-manufactured vehicles become old stock and dealers will be desperate to quit them.  (A number of vehicle manufacturers would still be stuck with 2018-made vehicles.)

Australian new vehicle sales are clearly hurting vehicle importers.  Mazda's decision to relocate part of its production from Thailand back to Japan can be partially explained by the high Thai Baht.  Another factor would be weak demand in Australia.  Mazda sales in Australia were down 30.7% in November (https://www.caradvice.com.au/811764/vfacts-november-2019-sales-results/_).

The dismal state of vehicle sales reminds me of a story from Thailand's restructuring era.

In the lead up to the 1997 financial crisis, the head of Thailand's main Mercedes-Benz importer had continued to make vast orders for vehicles.  With sales slowing, he failed to heed Stuttgart's pleas and kept order levels at boom-time levels.

When the financial crisis hit Thailand and the dilemma facing Mercedes-Benz in Thailand was revealed, there were over 20,000 brand new Mercedes-Benz vehicles stored in warehouses throughout Bangkok.  Some of these were SKD or semi-knocked down units which required partial assembly in Thailand and afforded the importer a partial tax exemption.  Many of these vehicles were manufactured several years earlier and were rapidly depreciating.

Quickly selling these vehicles would have affected sales of newly imported Mercedes-Benz vehicles and also impaired the brand's image in Thailand.  So a decision was made to lease large numbers of the vehicles to the hotels in Thailand on favourable terms through Mercedes-Benz's newly-established local vehicle leasing operation.  This company had largely escaped the crisis hitting other companies offering vehicle leasing and hire purchase and, over time, was able to assist with clearing the vast vehicle inventory.

It is highly unlikely one of the Australian vehicle distributors has a similar number of vehicles hidden in warehouses in places like Sydney or Melbourne.  However, it would be surprising if the new vehicle sales figures are completely accurate and there is not some form of continued fudging of the sales figures through dealers registering "cyber cars" and other arrangements (https://www.abc.net.au/news/2018-12-04/car-dealers-over-reporting-number-cars-sold/10580478).

December 2019

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