Car groups capitalise on Australian love affair with SUVs

Sales of sports utility vehicles overtook cars for the first time in Australia in 2017, as an improving economy drove record vehicle purchases. 

A decade-long surge in SUV sales reflects changing consumer tastes and increasing choice in Australia, where free trade deals inked with several Asian countries have slashed tariffs on imports.

The growing popularity of SUVs and light commercial vehicles has coincided with a slide in car sales, which have dropped by almost one-third over the past 10 years.

This is good news for the industry — SUVs carry a higher margin than the cars they are replacing. Dan Zhuang, a Hong Kong-based autos analyst for RHB Research, says vehicle groups typically earn an 11 per cent margin on sedans, while SUV margins are in the range of 16-17 per cent.

Richard Johns, an analyst at Australian Automotive Intelligence, said consumers liked the more upright style of SUVs, which gave them a better view of the road, and the extra luggage space. Fuel economy in SUVS had also improved over recent years, he said. 

Australians bought 465,646 SUVs during 2017 for a 39.2 per cent share of the total vehicle market, compared with 450,012 passenger cars with a 37.8 per cent share. Mazda’s CX-5 was the nation’s top selling SUV, notching 25,831 sales in 2017.

The popularity of SUVs is a global phenomenon. They account for more than one in three vehicle sales in the US.

Mr Johns said the reduction in import tariffs following free trade deals with Asian neighbours and a strong Australian dollar over the past decade had reduced costs for consumers and provided them with greater choice than many other markets. 

The pre-eminence of SUVs coincided with the ending of car manufacturing in Australia last year with Holden, Ford and Toyota — makers of the hugely successful Commodore, Falcon and Corolla car models — shuttering their local operations. 

Mazda, Hyundai, Toyota and Nissan made the four top-selling SUV models in 2017, according to a report by Australia’s Federal Chamber of Automotive Industries on Thursday. 

Tony Weber, chief executive of the chamber, said the industry was helped by an improving economy, low interest rates and fierce competition among brands. 

“The shift in industry dynamic we observed last year has now become entrenched in our market. It is a growth pattern that we expect will continue,” he said. 

Last year, Toyota retained its position as the top-selling automotive brand with 18.2 per cent of the market. Overall sales were 1.2m, up 0.9 per cent on 2016 and a new record in Australia. 

Matthew Callachor, Toyota Australia president, said the company passed 70,000 SUV sales in the country for the first time in 2017. He said over the past two years, sales of light commercial vehicles had grown by 18.9 per cent, compared with 14 per cent growth in SUVs. The Toyota Hilux was Australia’s top-selling vehicle in 2017, with more than 40,000 units shipped by the company. 

“They’re high-riding vehicles that can take you on adventures while delivering car-like features and comfort,” said Mr Callachor. 

More than a third of vehicles bought in Australia last year were manufactured in Japan. Some 297,482 were made in Thailand and 175,802 in South Korea. Just 56,851 were made in Australia.