Car industry hit by royal commission fallout and nervous customers
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Car industry hit by royal commission fallout and nervous customers

Auto industry giants Carsales.com and Bapcor have taken a pummelling on the sharemarket after the car sales site's profits were marred by a big write-down for its financing business and the car parts retailer forecast softer demand for the rest of the 2019 financial year.

Carsales shares slumped 5.4 per cent to $11.52 and Bapcor, which owns the Autobarn and Burson retail brands, slid 8 per cent to $5.91 on Wednesday.

Carsales chief executive Cameron McIntyre blamed the banking royal commission for continued difficulties in the vehicle sales site's financing division, though he said he expects "moderate" growth in profit over the second half of 2019.

For the first half of 2019, the website's net profit slumped 82 per cent to $11.1 million, largely as a result of a $47.8 million impairment at its car financing business,  Stratton. Mr McIntyre said this was due to regulatory changes affecting lending returns, and the tighter credit market.

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Carsales chief executive Cameron McIntyre.

Carsales chief executive Cameron McIntyre.Credit:Eamon Gallagher

The Australian Securities and Investments Commission (ASIC) in November banned so-called flex commissions, which had previously allowed car dealers and brokers to get bigger bonuses if they got customers signed up on higher interest rates.

"As detailed in our market announcement in December, our Finance and Related Services business continues to be impacted by credit tightening as a result of the Financial Services Royal Commission and the recent ASIC legislative changes," Mr McIntyre said in a statement.

And he was unsure when the effects of the royal commission would start to wear off.

“I don’t know. I don’t think anyone does. It’s difficult but it’s affecting everyone,” Mr McIntyre said.

Slower growing: Bapcor boss Darryl Abotomey expects sales to eventually rebound.

Slower growing: Bapcor boss Darryl Abotomey expects sales to eventually rebound.Credit:Jesse Marlow

More car buyers were looking at used, rather than new, vehicles in what Mr McIntyre described as a similar pattern to the consumer habits seen during the GFC or in a recession.

“It comes down to confidence and how confident we are feeling,” he said.

“We should be feeling confident, there’s low interest rates and low unemployment. We should be feeling confident but we’re not because of tighter credit and home prices [falling].”

In contrast, Bapcor boss Darryl Abotomey said his business had not been affected by the royal commission-driven changes as it focuses on cars that are more than three years old.

We should be feeling confident but we’re not because of tighter credit and home prices [falling].

Carsales CEO Cameron McIntyre

"[The changes] wouldn't affect us for quite some time, and in fact, [fewer] new cars sold is better for us because it means people keep their cars and have to get them serviced," Mr Abotomey said.

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The auto parts boss attributed the slowed-down growth in Bapcor's retail divison to poor consumer confidence. Same-store sales growth had more than halved, slipping from 4.4 per cent in 2018 to 2.1 per cent in the first half of 2019.

"We see the market as being a bit softer than it has been in the previous financial year, and that's all the general things that are going on in the market with consumer confidence," Mr Abotomey said. "However, even having said that, we're still going to see in our results we are going to be well above the prior year."

The company reported revenue growth of 3.2 per cent to $636.1 million and net profit up 6.6 per cent at $43.1 million from the same period last year.

Removing the impact of the Stratton financing unit from Carsales' results saw first-half net profit slip by 2 per cent to $11.1 million. Revenue rose 17 per cent to $235 million.

Jennifer Duke is a media and telecommunications journalist for The Sydney Morning Herald and The Age.

Nick is a journalist for The Sydney Morning Herald.

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