It's a sad day when one of Australia's most iconic brands decides to shut down. But it also teaches us a number of different lessons.
Large Holden sale discounts
According to Car Advice, Holden car dealers across the country are coming to terms with the exit of Holden. To try to move the leftover stock there are discounts of between $7,500 to $17,500 on different car models. We'll see how much this affects AP Eagers Ltd (ASX: APE).
On the personal finance side of things it has long been recognised that cars could be the biggest cause of wealth destruction for the middle class. Good assets, like shares and property, will appreciate in value over time.
But cars depreciate in value the moment you drive them away. These discounts show how much profit was built into the sale price, and how much of a 'loss' buyers are taking. If you try to sell a new car you had bought yesterday, it's not going to be anywhere near as much the sale price as the dealer.
If you want to keep more of your money in your pocket, buy cars second hand and pay cash.
It's important to invest in the upkeep of your brand
Holden didn't seem to be that important to General Motors because of how small the Australian car market is. If you don't invest enough in the product and if you don't invest enough in advertising then it's going to lead to a disappointing performance.
Holden wasn't known for having the highest-quality cars, it didn't have very creative advertising or the best value cars. What was the selling point for Aussie consumers at the end?
Think about the best shares on the ASX like CSL Limited (ASX: CSL), Cochlear Limited (ASX: COH), REA Group Limited (ASX: REA), Afterpay Touch Group Ltd (ASX: APT), Altium Limited (ASX: ALU) and A2 Milk Company Ltd (ASX: A2M). They aim to have the best product in Australia, or in the world, and they make sure their target market knows they are among the best.
This sad decline underlines how the best businesses are ones that have long growth runways, are earning returns at an attractive margin and are investing for the future.
