A record year for new car sales in 2024 won’t be matched this year, with automotive industry experts predicting brands will have to start cutting prices to move stock in 2025.
Last year, 1,237,287 new vehicles were delivered in Australia – according to data from the Federal Chamber of Automotive Industries (FCAI) and the Electric Vehicle Council (EVC) – which marked a 1.7 per cent increase on 2023, itself a record year.
This result came as the fourth straight year of growth for the industry, which had experienced a significant downturn in deliveries in 2020 due to the COVID-19 global pandemic.
However, while the first half of the year saw big gains on the same period the year prior, the closing months saw a handful of drops, as carmakers finally caught up on order backlogs and cost of living pressures mounted on Australian households and businesses.
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According to vehicle services and market intelligence firm Cox Automotive Australia, this is expected to continue into 2025, with the industry group forecasting just 1.18 million deliveries to be made this year.
While below the back-to-back records of the past two years, this would still be above the deliveries seen in 2019 before the pandemic started to impact the local market.
Cox predicts carmakers will have to be prepared to cut prices or offer other financial incentives in order to move stock, with the days of near-endless price rises off the back of demand now over.
“As cost-of-living pressures continue to impact the private market, and with supply no longer an overarching problem, you can expect to see an even harder-fought sector in 2025, with keener pricing and finance options a likely result for private and fleet buyers,” Cox Automotive Australia CEO Stephen Lester said in a media release.
“We’re predicting a slight decline in volume this year, and more margin pressure for retailers.”
This prediction of slower sales and price reductions was also forecasted by market leader Toyota at the start of the year, despite the Japanese brand coming off its 22nd consecutive year at the top of the sales charts.
“The Australian new car market has always been one of the most competitive in the world, and 2025 will be no different,” said Toyota Australia vice president of sales, marketing and franchise operations, Sean Hanley.
“We expect to see more new brands and models, more choice and stronger competition – which, in the end, is great for the consumer.
“Right now, we think the market will ease marginally from the records set in 2024, mainly because of a better balance between supply and demand. We then foresee a return to a more normal market environment.”
As previously reported, this year a number of new brands – mostly from China – are set to come to Australia, further dividing our relatively small market.
Australia has approximately 60 brands currently operating in the market, about 20 more than the US where more than 10 times as many vehicles are sold annually.
The New Vehicle Efficiency Standard (NVES) emissions regulations are also expected to lead to change in the market, as carmakers will be penalised for going over the CO2 limit from July 1.
Other factors expected to impact Australia’s car market include the closure of the Fringe Benefits Tax (FBT) exemption for plug-in hybrid vehicles (PHEVs), which experienced a greater year-on-year sales gain last year than electric vehicles (EVs) and hybrids.
“Big picture issues to watch include the Federal Election in April or May, the introduction of the New Vehicle Efficiency Standard, the end of Fringe Benefits Tax concessions for PHEVs, predicted cash rate cuts from the Reserve Bank of Australia, and the ongoing increase in volume from Chinese domestic brands, which captured 12 per cent market share last year,” Mr Lester said.
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