Flat 2018 predicted for new car sales after four years of record growth

The Motor Industry Association predicts that close to 160,000 new vehicles were registered in this country in 2017. Picture / Brett Phibbs.

New vehicles sales are expected to be flat this year after four years of record growth, with immigration coming off the boil and households nervous about their finances.

The Motor Industry Association predicts close to 160,000 new vehicles were registered in New Zealand last year, though official numbers that include December won't be confirmed until next week.

That would mark growth of about 9 per cent on 2016, during which 146,753 new vehicles came into the country.

The best-selling new vehicle between January and November remained the Ford Ranger with 8824 registrations, followed by the Toyota Hilux on 7664.

The best selling new vehicle between January and November remained the Ford Ranger, with 8824 registrations. Photo / NZME

But record growth may not be repeated this year, with some in the motor industry seeing a flat year for sales ahead.

That's because some of the factors that have driven new car sales – such as high net immigration – are beginning to change, said association chief executive David Crawford.

"I think some are calling it as flat year. Bearing in mind a flat year is still historically high," Crawford said.

"Whether it dips it's hard to tell, it depends on whether interest rates start going up. If interest rates start going up then I think we'll start to see a change in purchasing patterns."

Net migration was unchanged in the 12 months to November at 70,400 people, down from its peak in July of 72,400.

But economists are predicting, long term, that these figures will drop drastically.

Westpac's Satish Ranchhod believes net migration could fall to as low as 10,000 by 2021, while ASB's Mark Smith has forecast a fall to below 40,000 people by the end of next year.

Consumers are also feeling nervous, with households concerned about the general economic environment and their personal financial situation.

The latest Westpac McDermott Miller consumer confidence index fell 5 points to 107.4 in the December quarter, below the long-run average of 111.4.

A reading above 100 indicates optimists outnumber pessimists, and the survey has been above that level since March 2011.

The number of households who think now is a good time to buy a major household item was down 5.7 points to 13.4 per cent in the December quarter, below the long-run average of 26.3 per cent.

Luxury vehicle sales – which Crawford takes as an indicator of shifting trends – have also been softer in the past three or four months.

"They are flattening off - that would suggest to me that we would get a flattening off in 2018 ... they were the first to flatten and dive pre-global financial crisis, then eight or nine months later the rest of the sales went south as well," he said.

Meanwhile, NZX-listed Turners Group said the used-car market was going from strength to strength, having seen sales increases of at least 2 per cent a year since 2012.

Turners' Greg Hedgepeth said 2017 would be another record -breaker all up, because the 11 months to November was already 1.96 per cent ahead of the whole of 2016.

"The main growth area is used ex-overseas imports, currently 11.16 per cent ahead of 2016 year-to-date," he said.

Hedgepeth predicted growth in 2018 of a further 2 per cent, which would mean close to 1,170,000 used vehicles would be sold.

"One of the key reasons we see increases in the future is that the NZ light vehicle fleet is continuing to age. The average age for the light fleet is 14 years, over 16 years for used imports. This has been steadily increasing, but at some point this will have to change, creating an opportunity for sellers of younger used vehicles like Turners," he said.

"Scrappage of 1995 – 1999 vehicles is currently accelerating, so 20-year-old cars are beginning to be replaced at a rapid rate. The opportunity here is massive as cars with a year of manufacture 1999 and earlier currently make up almost 30 per cent of the light fleet."