Australian Car Dealers Call for Freeze on New Brands as Market Squeezes Margins

Australia's peak motor dealer organisation has sounded the alarm on an intensifying showroom price war, warning that the local retail car industry has hit a breaking point and urging the Federal Government to halt new brand arrivals.

The Australian Automotive Dealer Association (AADA), which represents roughly 3,900 franchised dealerships nationwide, released a 10-point reform plan following industry benchmarking data compiled by Deloitte Motor Industry Services. That data revealed average dealership net profit margins dropped to negative 0.2 percent during the September quarter. It marks the first time Australian new-car retailers have operated at a collective quarterly loss since the global financial crisis in late 2008.

Brand influx triggers showroom crowding

The financial strain comes despite resilient overall showroom sales across the country. The core driver, according to the dealer lobby, is an extraordinary influx of new vehicle marques competing for a relatively compact market.

Australia currently hosts 67 competing vehicle brands, up sharply from 39 in 2021, with Chinese manufacturers accounting for much of the recent surge. China-built cars accounted for more than 36 percent of local vehicle sales in October. Dealerships report that aggressive sales targets set by overseas parent companies have flooded lots with stock, forcing deep discounting and compression of retail margins. In response, the AADA has asked Canberra to explore a temporary freeze on new entrants alongside a capped licensing scheme and stronger statutory dealer protections.

What this means for your novated lease

While dealership lobby groups are feeling the pinch, the hyper-competitive climate creates distinct advantages and key considerations for Australian employees setting up a novated lease.

• Stronger bargaining leverage: Dealership yards are heavily stocked, and retail margins are under pressure. That gives salary packaging providers and vehicle buyers significant room to negotiate keener drive-away prices and manufacturer bonus offers.
• Lower upfront financed capital: Securing a discounted purchase price reduces the total amount borrowed under your novated lease, which directly trims your monthly lease deductions and lowers ongoing finance charges.
• Careful brand selection matters: With dozens of newly arrived brands vying for footprint, prospective buyers should assess long-term distributor stability, dealer network backing, warranty terms, and local parts supply before committing to a multi-year term.
• Depreciation and residual values: Heavy manufacturer discounting can accelerate early depreciation on popular new vehicles. When tailoring your lease structure, consider realistic end-of-term balloon values rather than relying solely on standard assumptions.