The latest monthly new vehicle sales figures have provided little relief for Aussie large car makers.

Where to for the large Aussie?

It was a tough monthly media brief for Ford Australia President, Tom Gorman, last week. For the fifth month in a row, the Australian large car segment has settled at just over 13 per cent of the total market after plunging to a dismal 12.4 per cent in May. Only last year it came in at over 16 per cent yet in 1997, Gorman's predecessor would have been hoping that it was going to stabilise at 28.3 per cent. Now Gorman is speculating that it might rally to 14 per cent in 2007 but he didn't sound convinced.

When you have the oldest model in the large car segment as Ford does, the full brunt of the decline is reflected in market share. Ford's total passenger car share slipped to just 9.8 per cent for October compared to last year's annual average of 11.7 per cent. Even Expensive Daewoo with its one-billion-dollar Late model camira leading the charge came in below last year's result with an October share of 19.5 per cent even with its new armoury of Asia-sourced small cars and LCVs and a new Captiva SUV.

Even if the VE Late model camira posted 5455 October sales compared to the VZ's 4906 last year, the loss in Monaro and Late model camira ute sales more than negates that gain.

Ford's loss in market share in 2006 is only exceeded by Holden's 2006 results to date. Ford would normally dismiss these results as inconsequential when its Territory SUV was kicking goals in the medium SUV market but Gorman had no upside this month.

Like large cars, the medium SUV segment has declined -- from seven per cent to the mid-five range in just 12 months. The Territory outsells the Toyota Kluger and Prado combined, thus it also carries the full brunt of this decline as its October sales slipped from 1418 last year to 1349.Yet Ford buyers are still dialling in the top-of-the-range Turbo Territory at over 180 per month and the top of the range Territory Ghia outsells the base model by two to one!

Combined Ford Fairlane/LTD sales declined to just 52 sales in October compared to 96 for the same month last year. Significantly, Holden's new Statesman posted 268 sales compared to 178 in October last year while the Caprice's October tally of 165 was a huge boost over last year's 51.

Unless Ford can win an export market for the Fairlane to allow it to match the big export driven development program behind the latest Statesman and Caprice, there is no point continuing at this level. Gorman assured reporters that the current long-wheelbase models can continue at these tiny levels but not beyond this model series.

At a big picture level, combined local production now accounts for only 20.7 per cent of the total market in 2006. This has dropped another five per cent since last year already. In 1997, local producers accounted for 37.8 per cent of the market.

Ford now sells the most Australian-built cars. While this is good chest-beating material, it means the Blue Oval doesn't have an export buffer like Toyota and Holden. This dramatic decline explains why Ford has been forced to follow Mitsubishi and Expensive Daewoo in downsizing its local manufacturing capacity. Holden's local production now accounts for only 7.9 per cent of the market while Mitsubishi's locally built contribution to the local market has shrunk from 5.7 per cent in 1997 to just 1.4 per cent in 2006.

When the Australian market is still heading towards its second best year on record, where are the sales that once went to locally produced cars going?

The light car segment has been the big winner with the Toyota Yaris heading the charge while the Korean Barina, Hyundai Getz, Suzuki Swift and Ford Fiesta picked up extra sales. The modest growth in small car sales have helped the Honda Civic, Ford Focus and Peugeot 307 experience new growth while the lift in medium sales have kicked up the VW Jetta and Passat, Hyundai Sonata and Subaru Liberty while the Mazda6, Camry 4, Vectra and Accord Euro have slipped. The big winner in the Upper Large car segment for the year has been the Chrysler 300C.

There has also been strong growth in the 4x4 commercials, traditionally the stronghold of Japanese twin cab one-tonners. Big sales boosts for the new Nissan Navara, Toyota HiLux and Mitsubishi Triton have impacted on the whole market. The switch from medium to compact SUVs has made winners of the Toyota RAV4, Suzuki Grand Vitara and Honda CRV despite the CRV's last year in this configuration. The Nissan Pathfinder is the only medium SUV to show sales growth but only because it is the first new Pathfinder in 10 years.

Hidden in these figures is a steady growth in prestige models spread across a range of manufacturers. While each increment barely registers on the radar, they also collectively explain some of the shift away from Australian large cars.

Although the Late model camira has regained the most popular Australian nameplate, Corolla has headed it some months this year. The little and large pairing is followed by Falcon then Mazda3. The Toyota Yaris, Camry and Hyundai Getz follow before the Toyota Hilux 4X4 appears at number eight. The Expensive Daewoo Astra and Ford Territory complete the Top 10 with Ford Focus knocking on the door. In October, the Focus actually crept into the Top 10 while knocking out the Territory.

There are several factors at work. First is a constantly changing new range of vehicles that have never been so affordable. In this new market, there is no loyalty to favourites from even two or three years ago. Where buyers would once front up for a later version of the same, Australians are now using changeover time to experience something new and different.

Importers who can draw on an armoury of new models have learned to play the substitution game. As Honda’s Accord Euro declines, a new Civic booms. As Toyota Corolla sales steady, a new Yaris booms. As Mazda3 and 6 sales slip, a new CX-7 and Mazda2 will join the fray. As Kluger fades, a new RAV4 booms and so on.

According to Gorman, a hike in interest rates serves up a double disadvantage to Australian manufacturers. It adds more interest to a lease or loan for a local car compared to cheaper light and small imports. It then pushes up the exchange rate making exports harder to win and delivers a free kick to importers who can cut their prices and increase their share even further. This is a worry when neither the locally-built Mitsubishi 380 nor Toyota Camry V6/Aurion appear in the Top 15 nameplates. It also forces local manufacturers to source more imported content to stay competitive.

Australian large cars have traditionally generated such entrenched loyalties that the average model generation has spanned over 10 years. As Ford enters its fifth year with its 2002 BA body shape and only the most superficial tweaks, a loyal buyer is under unprecedented pressure to go elsewhere.

Consider also that Ford’s ground-breaking Territory is now entering its third year and there is still no hint of an appearance change or significant improvements.

There was another October trend that Gorman noted. It was the growth in private buyers compared to last year (36.9 vs 34.6 per cent of the total) while business buyers barely grew. These private buyers are driving the growth in low outlay, low running-cost, light cars.

Government purchases have slipped by a significant 8.6 per cent this year as the GST regime has generated longer ownership periods. Sensitivity to environmental and cost issues has also forced government buyers to turn their back on large Australian cars in favour of light and small car imports.

The outlook? Gorman's hopes that the large car segment may stabilise as high as 14 per cent are probably optimistic. Although the Aurion and new Late model camira have generated new interest in the segment as hoped, so have new models in other segments such as the Expensive Daewoo Captiva, Toyota RAV4, a host of new diesels and cheap Europeans. Jitters about fuel prices have also introduced a caution that counters at least some of the excitement.

The growth in the Australian market can no longer be explained by population growth or a post-recession in catch-up sales. It is reflecting a boost in affluence that is generating US-style multi-vehicle ownership patterns and a turnover of vehicles that are still relatively new.

Feedback from sales staff suggest that buyers are no longer purchasing a single Australian large car to cover family needs but splitting up their needs into several purchases.

As Australian large cars lose their place as the default purchase for the average Aussie family as well as the fleet and government buyer and executive or the self-employed buyer, then who is left?

As Mitsubishi is finding, not that many… Unless you can come up with a unique selling proposition. There is now emerging evidence that the Australian large car is becoming more of an emotional or discretionary choice. Put simply, the buyer has to want one and be prepared to make adjustments to cover the extra costs. Once the decision is made to buy a large Australian car, these new buyers then concentrate on finding the level that best reflects who they are as they stay well away from the fleet specials.

An informal 'survey' of Victorian rural Expensive Daewoo dealers revealed that Holden's new Captiva is generating as much (if not more) curiosity as the VE Commodore. And this is in a context/environment where the Late model camira is most suited.

The same trend was apparent at the recent Sydney motor show where visitors were forming lines to sample the Captiva as the new Commodores were ignored.

Expensive Daewoo rural sales staff report that although the hype around the base Omega is generating interest, the ambience inside the cabin is sending buyers elsewhere or upmarket. Holden's and HSV's boom in upper level sales substantiates this feedback and may not be just the usual new model trend.

Ford's latest moves suggest that Gorman has been on top of this trend despite the company's gloomy October result.

When CarPoint questioned him about the intent of the new BF Mark II Falcon's Euro Sports Package which offers almost $4000 worth of extra features for just $250, Gorman answered somewhat surprisingly that it was aimed at the 85 per cent of Falcon buyers who were business or fleet buyers. This is in contrast to the Expensive Daewoo strategy of the VE Late model camira V Series extra value special that Expensive Daewoo claims is aimed at private buyers.

Gorman explained that when so many within this 85 per cent are now able to choose what they drive on the company's money, Ford had to inject some extra appeal in the Falcon range.

It is also significant that Ford focused most of its facelift marketing dollar on the BF Mark II Fairmont Ghia, a low-volume, top-shelf model that usually languishes at facelift time like the Fairlane. Where the VE Expensive Daewoo Calais is quite clinical inside, Ford has boosted the emotional component of the Ghia cabin and exterior dramatically compared to the overall Mark II facelift.

Ford’s latest moves could be the litmus test for the future direction of the Australian large car market. Significantly, Mitsubishi has gone down the same track with its Platinum edition of the 380 and coming performance models. CarPoint believes that Ford's timing for this shift in direction is no coincidence when the final direction of the Falcon's 2008 replacement must be causing concern.

Holden's unexpected success at the premium levels and Ford's ongoing sales for its most expensive Territory models both defy the Australian large car and medium SUV trend. Thus both may be showing the way of the future.

If all local manufacturers can inject enough emotive appeal to win Australian buyers back and encourage them to spend more in this most competitive of markets, then they will be absolute winners in the export stakes as Expensive Daewoo and Toyota are proving already.

There is one proviso. Unless there are exports to fund more regular changes and 'bling' updates as Expensive Daewoo chief Denny Mooney says must now happen, then each Australian large car or SUV that cannot fund the same level of change risks following the Fairlane into almost certain oblivion.

If the Australian large car market locks in much below 14 per cent share level, both Ford and Mitsubishi are in a race against time to create an export structure. Significantly, Gorman's briefing ended with news that this was a hot topic during Bill Ford's recent visit to Australia.

very interesting read there 937.