Like every auto market around the world the Australian car market is not immune to the devastating effects of COVID19 – with sales through the end of April down by 50%. This is the worst monthly sales number since the industry began keeping sales data in 1991.
The sales data is backed up by toll-road operators who reported a drop of 50% fall in traffic, and fuel prices falling to their lowest in almost two decades.
However, one company appears to have dodged a bullet – BMW. The luxury carmaker saw its March monthly sales fall just 5.7% - against the backdrop of a broader 50% fall across the market.
BMW outsold its major competitor, Mercedes-Benz, selling almost double its Stuttgart-based rival, which recorded a 54% sales drop.
However, as always there’s always a back story. Whilst the impact of COVID19 on car sales has been ‘immediate’, the car business runs on ‘the future’. New models are planned years ahead; imported cars are specced and ordered months in advance. Regardless of what’s happening in the marketplace, a carmaker may have a year’s supply ‘on the water’ and can’t exactly turn back the boats.
My moles in the retail side of the car industry have been feeding me somewhat disparate tidbits of information, which allows me to create a hazy, but logical background to the changes in the market status of the main brands, and BMW's apparent success.
A statement from BMW Australia’s CEO includes some pointers to why the brand fared better than its rivals. These words were very carefully crafted into a statement which actually says ‘not a lot’.
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| BMW Australia CEO Vickram Pawah |
Vikram Pawah’s statement included the following: “Our current results reflect a focus on promoting our continually expanding line-up of vehicles.
“It also highlights our close collaboration with our dealer partners which have seen numerous measures implemented.”
Here’s the translation: BMW has a LOT of new models coming into the showrooms; and these cars were ordered a long time ago; have mostly just arrived; and need to be shifted quickly, otherwise the overstocking would drag BMW and its dealers down like a sinking ship. This emphasises on the word ‘collaboration’ means dealers get bigger bonuses and cash incentives to move cars.
Also, there’s another trick BMW (and to be fair, all car companies) indulge in.
Companies register a LOT of demo cars when sales are down, or the sales curve is threatened by either market conditions or competitors’ stimulus. When I worked in the USA, BMW North America was the standout, which religiously registered swathes of ‘demos’ in the last days of the month, to boost the month-end sales numbers. The US system allows companies to then ‘de-register’ the demos at the start of the next month.
Unfortunately, the Australian data capture does not allow de-registration, so the demo ‘sales’ stay in the data set. The Australian Auto Dealers Association has called for VFACTS (which compiles the data) to separate out demo registrations.
In addition, BMW’s main rival, Mercedes-Benz, appears to have stopped the aggressive trading and cash support for moving its most popular model, the C-Class sedan.
One M-B salesman told me that his instructions were that:
“If a potential buyer merely touched the wing mirror on a C-Class, then you must make sure they leave the showroom with a new car – whatever it costs.”
In other words, Mercedes-Benz would go to any lengths to ‘buy’ market share, which had the effect of the C-Class often outselling cars much lower down in the price spectrum, and resulted in fantastic C-Class sales numbers for M-B. Maybe Mercedes-Benz Australia has now decided to conserve its cash, for a rainy day.
I’m sure most buyers don’t really understand the mysteries of new car selling. The dealer cannot LOWER the price of the basic car, however, when push comes to shove, you will often find that the ‘Manager’ has told the salesman that he can ‘throw in metallic paint, different wheels, and a variety of extras’ - at no charge. You end up with such a great deal, you can’t say NO.
However, this is all academic. Car sales go up and down like a yo-yo, often responding to immediate changes in the market (like COVID19), or an unwelcome re-supply of cars from overseas factories, just when the local company may be finding it hard to move its current stock.
The easiest, and most efficient way of moving cars in a down market, is to ask Head Office to throw more cash at the problem. No, discounts and bonuses are not the most effective way to get a good ROI (return on investment), but the cars have to keep coming out of the sausage machine, going on to boats, and they have to find a new garage to occupy. That’s the way the cookie crumbles.
Just watch the new car sales data for the next few months. BMW Australia may be enjoying its day in the sun, but after all: “Life’s what happens, when you’re making plans.” I’m sure the yo-yo’s will continue to influence outcomes.
John Crawford
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