2CC - 2 Cheap Cars Group

[lorraina]

Well well well.
Which company is the first company on NZX list of companies.?
Which company is the first company on my Stocknessmonster.com watch list.?
Which company is top of the list of my ASB share trading platform watch list.?
2CC Number One on all lists.

Brilliant.

[winner (n)]

Well well well.
Which company is the first company on NZX list of companies.?
Which company is the first company on my Stocknessmonster.com watch list.?
Which company is top of the list of my ASB share trading platform watch list.?
2CC Number One on all lists.

Brilliant.

Only came in at #2 on my stockness ....... 14D still tops 1414 Degrees

So don't take an interest in that Percy

[lorraina]

Crickey 14D has an even lower market cap than 2CC.

[Basil]

A lot of their business has been aided by the clean car rebate scheme, for example
https://www.2cheapcars.co.nz/used-vehicles/toyota/aqua-hybrid/94686
In this instance this hybrid is eligible for a clean car rebate of $1,676 which is a significant 16% of the vehicle's purchase price and brings the net effective price to less than $9,000.
The final day for this tailwind is this Friday 30 June.  After that the incentive for hybrid cars disappears and it becomes a headwind for the rest of their non hybrid and EV business with a lot of imported non-hybrid cars attracting significant new costs under the scheme.  Not an expert on the extent of the changes coming but I was quite shocked to see on one website regarding new cars on the weekend that from 1 July 2023 a ~ 7 liters per 100 km vehicle (which is a pretty efficient bit of kit) attracts a new fee of nearly $3,000 and a ~ 9 liters per 100 km vehicle a new fee of nearly $4,000.!  Wow that's significant on a say $30,000 - $50,000 new car!

More information on these changes here.  https://www.nzta.govt.nz/vehicles/clean-car-programme/clean-car-discount/clean-car-discount-1-july-2023-changes/#:~:text=From%201%20July%202023%20rebates%20and%20fees%20for,will%20decrease%2C%20and%20the%20maximum%20fee%20will%20increase    A bit less outrageous for used vehicles I see but this new headwind is something I see as being very serious.
Obviously with "cheap" cars the percentage difference (extent of the new headwind) and its effect on the affordability of the purchase is a lot higher relative to the purchase price whereas at the other end of the spectrum I doubt anyone buying a new Ferrari will be worried about the changes.

Very easy for management who have no real experience in the industry to underestimate the effect of changing from an environment of tailwinds to headwinds.  Take their forecast for FY24 with a very large grain of salt. 

Just as an aside I will add that for vehicles bought in N.Z., like Turners do for most of their cars this effectively becomes a tailwind as the whole pricing structure of the used car market changes, anything bought in N.Z. as a secondhand car that doesn't attract these new fees confers a meaningful competitive advantage.

[Rawz]

Have car dealers been making surplus margins with the rebates?

[lorraina]

Of course they would have.
They are not registered as a charity...
NB.Warning.
Never stand between a used car salesman and a dollar.

[Buzz]

The final day for this tailwind is this Friday 30 June.  After that the incentive for hybrid cars disappears ...

That's not quite right, the fees and rebates are not related at all to the 'type' of the vehicles, they are calculated against the CO2 emissions of the vehicles. Check the link you provided for more detail, the charts are a helpful indicator and you'll see that the bottom axis is CO2 emissions.

[Buzz]

You are also confusing the Clean Car Discount/Fee (CCD) with the Clean Car Standard (CCS).

The CCD fee or rebate is incurred by the buyer of the vehicle, it has no financial effect +/- on the dealer. So it is not a tailwind or a headwind to the dealer. These are the fee/rebates that are changing on 1st July, the impact is on the buyer.

The CCS fee or CO2 credit is incurred by the importer of the vehicle. These do affect the +/- financials of the importer. There are no changes occurring to the CCS fee/credits.

[Basil]

You're quite right Buzz its all about the CO2 emissions and you're correct I haven;t drilled right down into this.  In general though I noted there are some very big changes coming, that's the point I was trying to make and those changes as a percentage of the purchase price are most acutely felt at the "cheap" end of the car market.

Even at the less pointy end I was quite unpleasantly surprised to see a new Kia Sportage diesel which is a very efficient bit of kit for a medium SUV at only 7.3 liters per 100 km, (I am so impressed with the Mrs one I was thinking about getting one for myself), will attract a fee of just on $3,000.

We're not short of a quid but to me that feels like quite a big and unwelcome increase on a $47,000 vehicle adding 6.4% to the cost so I can only imagine how that sort of increase would feel to someone shopping for a $10,000 vehicle, adding 30% to the cost!
Do you think that might change buying habits ? 

My contention is that no matter how you slice and dice this, something this material that affects the buyer this way affects the dealer too.  Less people changing cars either because they're more unaffordable, people find it objectionable to pay this sort of money in CO2 taxes or the increased capital cost makes its relatively more attractive to simply fix their existing vehicle.

[Buzz]

You're quite right Buzz its all about the CO2 emissions.  Some very big changes coming, that's the point I was trying to make and those changes as a percentage of the purchase price are most acutely felt at the "cheap" end of the car market.

Even at the less pointy end I was quite unpleasantly surprised to see a new Kia Sportage diesel which is a very efficient bit of kit for a medium SUV at only 7.3 liters per 100 km, (I am so impressed with the Mrs one I was thinking about getting one for myself), will attract a fee of just on $3,000.

We're not short of a quid but to me that feels like quite a big and unwelcome increase on a $47,000 vehicle adding 6.4% to the cost so I can only imagine how that sort of increase would feel to someone shopping for a $10,000 vehicle, adding 30% to the cost!
Do you think that might change buying habits ? 
Something this material that affects the buyer this way affects the dealer too.  Less people changing cars.

Absolutely that's what it's designed to do, it is social engineering to incentivise low emission vehicles and disincentivise high emissions. My point though is, this CCD affects the buyer, it has very little effect, none financially on the dealer (except what type of vehicles they choose to sell). We cannot attribute CCD to a tailwind or headwind to a car dealer.

CCS on the other hand, we definitely can. And both of these schemes are designed to and do distort the 'market', and are temporary when the powers that be decide enough is enough, they will vanish. If Nat/Act get into government, they will disappear a lot more quickly.

[Buzz]

It might help to point out that the CCD fee/rebate ONLY applies to the first registered buyer of the vehicle in NZ (i.e. new or used imported vehicles). It does not apply to any subsequent re-sales of vehicles.

[Rawz]

I don't think the rebate/fee will effect the used market as much as the new market. Most used car purchases (especially 2CC target market) are 'needs' base. VS new car purchases one could argue a good portion is 'want' based. If i think back to the 5 used cars Ive purchase in my life 4 of them were needs and only 1 was a upgrade purchase. Im now on the company car gig so i dont have to worry about that anymore.

2CC take (by memory) 42 days to sell a car once it arrives at a dealership. They can pivot their buying out of Japan to meet demand or forecast demand based on how to maximize the new CO2 rebate.

Turners guru Todd Hunter has told us the NZ vehicle fleet is aged and a lot of cars need replacing sooner or later. This is the- I NEED to get a new car this weekend factor. And hopefully its bought from 2CC or Turners as I have a few bob each way

[Basil]

If Nat/Act get into government, they will disappear a lot more quickly.

Yes...I think there's going to be a lot of farmers pretty annoyed about having to pay a whopping $6,900 Ute tax on their new Ford Ranger or Toyota Hilux.

[kiwi2007]

Partners car was just written off so will make sure we have a look around 2cc and see how good (or bad) their service is.

(My partners car was parked up and driven into by a fully insured third party - my partners insurance doesn't actually cover the full cost of an exact replacement. However, she was told by her insurance company that, had she been uninsured, she could have claimed the full cost from the guilty party's insurance co. Seems very odd).

[Basil]

Mrs has been involved in a few incidents over the years and I can tell you that's standard protocol.