Will we keep on buying new cars?

Back in 2007 the Australian new cars industry passed the magic one million sales, and in 2015 another new record was set. But is that growth, or keeping pace?

TWENTY-FIVE YEARS ago Australia’s population was just 17 million people, and just over half a million cars were sold every year, representing about 3% of the population. That doesn’t mean to say that 3% of people bought a new vehicle because those figures include fleet sales.

In 2015, there were 1.1 million cars sold, more than double, representing about 5% of the population.

Here’s what the last 25 years of population growth and car sales looks like:


population-percent-growth2So are we buying more new cars per person? Yes, we are. This graph plots the population growth and new car sales volumes:

population-new-car-sales2And it shows that the new car sales growth is above the population growth, and moreover, increasing over time. Australia’s total number of cars is growing too, up to 18 million in 2015, and a pretty steady 6.3% are replaced every year with new vehicles.

Can this be sustained? There are two competing forces at play, and the net result is probably going to be a decline.

On the side of improving car sales are the carmakers efforts, but it’s hard to see how they will entice more people to buy cars as distinct from compete with each other for those who have already decided they need a car. The government might also do much to spur new car sales if it decides to reduce the average age of the Australian car so safety and emissions are improved, although that doesn’t look likely. Its recent moves to change the import laws aren’t going to affect the new car market to any significant degree either.

The bigger factor in new car sales is the one the automotive industry is worried about and not quite sure how they should handle. That would be the decreasing interest in cars among the generation coming up to driving age. An ABC report noted that the “number of under 25s without a driver’s licence has risen from 23 per cent to 35 per cent in just 10 years. In New South Wales, the proportion of young licensed drivers has fallen by around 1 per cent a year. ” And there’s similar statistics wherever you look, including in the USA where CNSW Research reports that people aged 21 to 31 buy 27% of new vehicles in the USA, compared to 38% back in 1985.

No longer do the young look upon the car as the ultimate status symbol – instead, that’s the latest iPhone or Galaxy. They also don’t need cars for rich, instant communication in this day of high-speed, wireless and pervasive Internet over which the likes of Instagram and Snapchat can be used for individual or group conversations, far superior to the rigid and one-dimensional, semi-private phonecalls their parents used to chat to their mates in their youth.

And inter-generational sniping aside, the fact is that these days university is not free, houses are more expensive relative to income than ever, and costs of living are increasing. This means there’s less cash available for a car. 

Then we have the ready availability of Uber and rise of car-sharing schemes which mean there’s less need to own a car even if you need one. I’d also argue today’s cars are less evocative than those of yesteryear – the low whine of a hybrid at the lights is not going to inspire a life-long passion in the same way as the throaty grumble of a V8, and the thrill of mastery is not as it once was, hence the premium prices paid for the last generation of cars before electronics took over half the driving. Sooner or later, car companies will realise gadgets to make cars go faster just make them more boring more quickly.

This is an industry-wide problem to which the car companies appear to have no answer other than to attempt to make cars cooler and more appealing to the younger generation, which will work for a little while but ultimately misses the point. It’s time car companies thought of themselves as mobility companies rather than car companies, in the same way that phones are now really communication devices, and telcos – telephone companies – are now communications providers. People will always need to travel, but it won’t always be by cars as we know them now.

The manufacturers that can adapt to the new world are the ones we’re likely to see in 20 years time, and the rest will be footnotes in history next to Nokia.

Robert Pepper

Robert Pepper