Are we looking at 36,000 new car sales for May?

Since 2014, we have been monitoring the amount of Seek ads that are placed, on a weekly basis, for positions within the automotive industry. It is by no means an exhaustive count of every single ad, for every single dealership, but is instead a cross-section of advertisers, giving us a general feel for the market, and whether things are picking up, or slowing down.

Today, we have overlayed these advertising figures with monthly new car sales figures, commencing January 2018, to see how elastic automotive vacancies are, compared to peaks and troughs in the new car market. Just like March and June are traditionally busy sales months in the industry, February and November, give or take a month, typically represent the busy hiring periods, with January and April commonly being quite slow.

Since mid-2017, advertising has been in a polynomial decline, however, as our monitoring is limited to advertising on Seek.com.au, this could simply be that advertisers are relying less on this platform, and are instead moving to other sourcing mediums or methods.

January 2020 represented the lowest advertising rates for the industry since we have been keeping track, with the second-lowest January record being 2015. Peak advertising appeared in March of 2017, followed by February 2018 and March 2018.

We expected to see that the higher sales months would lead to a higher advertising presence in the months following, but the figures indicated otherwise. In actual fact, advertising in 2018 was higher in the February, March and April period. Slow sales in April corresponded with a decline in advertising in May, yet the substantial increase in sales activity in June, had very little impact on advertised positions, with ads holding steady all the way through to December before the inevitable January slump kicked in. This pattern, for the most part, repeated itself in 2019.

If you have been following the decline in the local and international money markets, and the corresponding discussions that have been had regarding economic improvement, numerous mentions have been made of a "V" shaped recovery. This is, of course, predicated on our having reached the bottom of the market. Looking at the equally matched drop in advertising and sales, and where ad rates sit right now, it may seem that we are not yet quite at the bottom of the market, with May vehicle sales potentially going to fall to around 36,000 units. If this is how things play out, this would be something of a double-edged sword, being a 60% drop on May 2019, but only an 8% drop on April, as opposed to its 50%+ drop on March. Hopefully, things go the other way, and we see an improvement in both advertising and new car sales, but if we see more of a "U" shaped recovery, rather than a V (or a "W", or "L"), and if a "cash for clunkers" scheme gets more traction, which probably couldn't get off the ground until July, the traditional June peak may not arrive until August, or even September.

I think it is fair to say the Federal Government has done a pretty good job so far, on steering Australia through this crisis. It hasn't been perfect, but with fewer than 100 deaths, and now less than 800 active cases, we are certainly in a strong position, when compared to other nations.

So whilst it would seem that the primary correlation between new car sales and advertising is that of a negative relationship, with the number of redundancies, layoffs and stand-downs that have occurred, I believe we can expect to see a big increase in advertising commencing in the next few months. This will make for an extremely competitive market, with most dealers looking to refill their ranks, and chasing the best talent.