A drastic change in an Australian tax may not prove to be the good fortune automakers once thought.
The former 22.5 percent wholesale price sales tax was replaced July 1 by a 10 percent goods and services tax. The tax shift cut retail automotive prices by about 6 percent. The tax applies to all consumer goods and services, with few exceptions. It adds a tax to some goods but reduces taxes on cars and trucks.
Before the tax shift, there was a predictable drop-off in vehicle sales. This came despite manufacturers' efforts to tempt buyers in the pre-tax market with discounts and optional equipment deals matching or beating post-tax prices.
July sales totaled 79,449 new vehicles, up nearly 30 percent from June and 26 percent from July 1999. But year-to-date sales are still down 6 percent. So the market still suffers from tax shock.
Ford Australia President Geoff Polites admitted there has not been a 'stampede' to the showrooms, adding that sales of vehicles for government and company fleets had been 'pretty poor.' He said that fleet owners are assessing the impact of the new tax on the residual values of their existing fleets. Many businesses have decided to wait for the market to settle.
It was the worst July for fleet sales in a decade, Polites said. The increase in sales was driven by private buyers and, certainly in the case of Toyota, by heavy rental fleet purchases.
Toyota was market leader in July for the first time this year, overtaking Holden, General Motors' subsidiary in Australia. Toyota was boosted by the first month of sales of its locally built Avalon. In particular, an Avis rental fleet deal accounted for about 25 percent of Toyota's total Avalon sales of 2,419 vehicles.
Toyota claims that one of its largest retail promotions created the surge. The campaign, which offered price reductions before the tax took effect, closed the sales gap on Holden for the first seven months of the year.
You can e-mail free-lance writer Bob Jennings at [email protected]