As the electronic vehicle market continues to explode in Australia, every week seems to mark the entry of another car brand into the Australian market. Recently it has been concentrated on cheaper EV brands, mainly from China, that are trying to force their way in and establish a market share in this burgeoning sector. With the success of BYD undercutting the expensive Tesla models, cementing a large market share in record time, other brands have taken notice and are trying to achieve the same thing. But what does this mean for Australians, and is more choice and options always a good thing for consumers?
BYD announced they sold just under 19’000 vehicles nationally in June. This equals a 13.5 percent market share of new vehicle sales, coming second to only the market-leaders of Toyota with a 13.7 percent share. Their timing into the Australian market couldn’t have been better, as their position in Australia’s EV market allowed them to take advantage of the worldwide interest being created by Tesla, but their lower costs and delivery wait times made these vehicles more accessible to the average person than the ‘prestige’ Tesla options.
BYD have been a very successful disruptor to Tesla, and new car manufacturers are poised to try and do the same thing back to them. But the question remains, is this a good thing? Are more options always better? Why does Australia have so many car brands on offer compared to other similar countries with larger populations and economies?
Australia’s economic policies
Australia’s foreign economic policies leave very few barriers for new car manufacturing companies to enter Australia and compete on price. Without concerns of tariffs or trade restrictions to help protect local manufacturing, the financial barrier to entry is very low, making Australia a popular location for newer companies looking to establish themselves globally and to start building a reputation.
Australia also has trade agreements with many of the strongest car manufacturing countries, such as Japan and Thailand, even further reducing the red tape some companies must overcome to reach Australia.
Having such low barriers for entry into Australia’s car market means companies do not need to be extremely stable before entering the country. Despite the relatively low population, these economic policies and the high average income of Australians makes the country a great test market to enter and ‘have a go’.
The procession of new car manufacturers into and out of Australia makes it harder for a consumer to make the right choice. Not only do you need to consider what is the best car for their needs and budget, but if that company is likely to be there long term for warranty, servicing, and the retained value of their car when they eventually go to sell it and upgrade.
No local manufacturing or sentiment towards ‘local’ brands
Since the end of 2017, Australia has been an ‘import only’ market. While Holden manufactured their cars overseas from 2018, they were still the closest thing to an ‘Australian’ car brand for those with local loyalties. But the decision by their US parent company to close them down in 2020 meant that now all car brands in Australia are fully international companies competing on the same terms with each other.
This created a situation where the government had no local economy or jobs to protect, and Australian’s also never had less brand loyalty than they do currently. In our experience of over 30+ years in the industry, we have never seen more people walking away from established brands to try something new.
New can be exciting, but it also lacks the stability of established brands. On more than one occasion we have had a customer buy a car from a new brand, only for that company to leave Australia before their finance contract finished, significantly hurting the price he could get for trading that car in.
Is this a good thing for consumers?
While economic competition is important for well-functioning capitalism, having a market that is flooded with non-established brands can cause all sorts of problems for consumers that are unfortunate enough to pick the wrong one.
As Australia does not have a big enough population to sustain the number of vehicle brands operating here, not all these manufacturers can survive. Or they need to take shortcuts to be able to compete on price.
Last year, more than 100’000 new cars were sold in Australia without safety features that many would consider basic. Removing them allowed manufacturers to reduce their vehicle price, and these features weren’t mandatory under Australian law. These aren’t fancy new features either, the most common one being removed was seatbelt reminder alarms for passenger seats, a feature that has been around since the 1980’s.
An alarm advising the driver that a passenger is not wearing a seatbelt is not mandatory in Australia, as it is only mandatory to have an alarm for the driver. This can be very concerning for consumers with children that would expect these types of features to be standard and confirms just how important Australian regulatory oversight is to stop manufacturers from cutting corners to lower prices.
The other major concern is the stability of these brands, and just how likely they are to still be in the country throughout the life cycle of the vehicles they sell.
Chinese EV manufacturer XPeng have shown just how volatile and tumultuous this experience can be for customers. They originally entered Australia with an exclusive distribution deal, but quickly came into conflict with their distributor who have now shut their doors. The XPeng factory have directly taken over the Australian market, and are trying to fix the reputational damage of long waits and $5000 cashback incentives that were never honoured.
While XPeng have promised to honour or improve on the warranty’s offered by the original distributor, they are still in the midst of messy lawsuits from both sides over their failed distribution agreement. Court injunctions or similar actions while this is sorted out could mean new cars are a long way away from being delivered to customers while the courts work through it.
While choice is great for consumers, what is more important is sustainability. It can feel overwhelming when trying to choose the right car when the options seem to be endless. The burden of responsibility has moved to the customer to understand all the relevant factors to not only pick the right car for now, but also picking a car brand that will still be in Australia throughout the life of the car. It also shows that Australia’s regulators have never been more important to protect Australia’s car buyers.