New car sales continue to grow

Down 2.8% compared to previous month but up 8.6% over last year

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Australians continue to buy new cars in ever increasing numbers.

Almost 100,000 new cars were sold in October 2012, according to the Australian Bureau of Statistics (ABS).

Sales of new cars have climbed 8.6% since October last year, although flooding in Thailand in June 2011 may have temporarily caused a decline in new car sales in the second half of last year, says the ABS. However, sales were down 2.8% (seasonally adjusted) compared to the previous month.

Related: Save up to $15,000 on a 'new' car

Car sales in Western Australia were the strongest, rising 21.5% (seasonally adjusted) compared to last year, which may be a factor of workers involved in the resources industry making use of their comparatively large pay packets. Queensland and NSW recorded much smaller rises of 6% and 4% (seasonally adjusted), respectively.

For listed companies with vehicle dealerships, like Automotive Holdings Group (ASX: AHE) and AP Eagers Limited (ASX: APE), the continued rise in sales is good news. The problem for them is competition is intense, with more than 60 brands competing for consumers' attention. That may be why consumers are being offered no-interest finance loans and massive discounts to buy 'near new' or 'demo' models. That is illustrated by the above two companies having consistent profit margins of less than 2%.

For after-market accessories retailers, like Super Cheap Auto – owned by Super Retail Group (ASX: SUL), and ARB Corporation (ASX: ARP), whether the level of new car discounting   makes little difference to their businesses. For these two companies, it's generally just the number of cars on Australian roads that affects their businesses – with the more the better.

Foolish takeaway

While the number of new cars sold continues to grow, its likely that the dealerships will still struggle to increase their profit margins, mainly due to heavy competition. Foolish investors may want to consider by-passing the listed new car dealers.

If you only invest in one company this year, make it our "Top Stock for 2012-13". Operating in two hot markets — one set to double by 2012, the other predicted to grow 5x over the next five years — this stock is a solid growth play that also boasts strong recurring revenue, zero debt, and lots of cash. Get its name and full research case in this brand-new FREE report.

More reading

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »