Motor Industry Retailers Feel The Brakes Are Coming On

The Age

Monday December 27, 1999

PHILIP HOPKINS

Business operators in the Victorian retail automotive industry are gloomy about the economic outlook for the next year, according to a new survey.

With the election of a new State Government in September, expectations have declined for the performance of the Victorian economy in general, and the retail automotive industry in particular, over the next 12 months.

The impending GST and a drought in country Victoria have contributed to the poor expectations.

However, the industry's expectations on the national economy over the next year have also declined.

A 1999 September-quarter survey by the Victorian Automobile Chamber of Commerce (VACC) said almost one quarter of businesses were operating below 60 per cent of capacity, and 40 per cent of businesses reported a downturn in sales.

Key features of the survey were:

* Lowest expectations on the Australian economy were in the motorcycle, used car, radiator service, commercial vehicle and new car sectors.

* Negative expectations on the Victorian economy were in all sectors of the industry, with the lowest in the radiator service, commercial vehicle, farm machinery and automotive electrical sectors.

* Average selling prices remained low, with more businesses reporting a downturn than an upturn. The used car and new car sectors were the worst hit.

* Low profit levels, with the biggest declines in the used car, towing and new car sectors.

* Capital expenditure on buildings remained low, with 61 per cent reporting no change in investment.

* Capital expenditure on plant and equipment declined in the quarter, returning to negative levels.

The survey said the main factors limiting business performance were lack of orders/demand (53 per cent), competitive discounting (49 per cent), taxes and charges (42 per cent) and competition from other sources (39 per cent).

Other important factors were government regulation (32 per cent), shortages of skilled and suitable labor (32 per cent), climatic conditions (29 per cent) and labor costs (24 per cent).

The executive director of the VACC, Mr David Purchase, said new and used car dealers had the lowest hopes because of the so-called buyers' strike, as people wait for the GST for a reduction in car prices.

``Some used car traders have had to retrench staff," Mr Purchase said in a statement.

``There are very strong competitive pressures and discounting in the industry, which is good for consumers, but which makes business difficult for our members."

Mr Purchase called on the Bracks Government to give the industry the attention it deserved.

He said the Victorian retail automotive industry had an annual turnover of $15 billion, with 10,000 businesses employing more than 50,000 people.