The lasting appeal of the caravan

ASX-listed Carsales, which dominates digital sales of new and used cars, is reporting double-digit earnings growth. Revenue has jumped as the supply of new cars into the country improves, drivers trade in their old vehicles, and sellers look to leverage sky-high used car prices.

“Our industry dropped to about 120,000 cars [for sale] online at the peak of the pandemic. Since then, it’s gradually been growing again. Now we’re at about 195,000 cars on Carsales,” McIntyre says.

The company reported half-year revenue of $332 million this week, a sharp increase of 37 per cent on the previous corresponding six-month period, albeit that result was boosted by Carsales assuming full ownership of the remaining 51 per cent that it didn’t own of Trader Interactive in the US.

Earnings before interest tax depreciation and amortisation (EBITDA) – a measure of profitability – were up 31 per cent, to $165 million.

Focus on vans

Locked down and unable to fly overseas for holidays as a result of the pandemic, Australians plunged some of their accumulated savings into a local alternative: taking a road trip.

About 800,000 recreational vehicles are registered in Australia – the vast majority of them caravans – and their owners are focused on exploring country areas, where about 90 per cent of trips occur, says the Caravan Industry Association of Australia.

SUVs and light commercial vehicles, handy for hauling camper trailers and caravans, made up nearly 77 per cent of new vehicle sales last year and make up eight of the top 10 selling vehicles.

‘People wanted to get out. They wanted to be in control of who they were in contact with and the destinations they visited. A recreational vehicle was the perfect alternative for them to be able to do that.’

Jayco executive Scott Jones

A new, entry-level camper trailer costs about $23,000. Caravans will set back aspiring holidaymakers at least $60,000, while campervans (a recreational vehicle or RV) range in price from $100,000 for a base model to $278,000 for a premium retiree-focused motorhome.

Sales of all models shot up in the aftermath of the pandemic, when overseas travel wasn’t an option and people weren’t keen on cruises. Holidaymakers wanted a safe, affordable way to travel, says Scott Jones, an executive with the country’s largest caravan manufacturer, Jayco.

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“People wanted to get out. They wanted to be in control of who they were in contact with and the destinations they visited. A recreational vehicle was the perfect alternative for them to be able to do that. So, the caravan industry saw a significant increase in interest and sales.

“Coming out of COVID we saw a 25 per cent increase in demand,” Jones says.

Registrations for vans rose 4.2 per in 2021 and a record 24,000 RVs rolled off local manufacturing lines – a 42 per cent increase in output from the year before. Another 19,000 were imported.

The well-documented supply chain crunch and shipping issues, coupled with strong demand, meant manufacturers such as Jayco had trouble sourcing components and employing enough staff to meet orders. That is now easing. “Lead times are coming back on component availability and shipping is starting to improve as well. We can now supply a camper trailer within 12 weeks,” Jones says.

He believes that freshly minted van owners, who purchased during or immediately after the pandemic, are likely to stick with caravaning as a holiday option despite overseas travel now opening up.

“There’s certainly numerous people that will remain in the RV industry and want to use that as their holiday option moving forward. We’ve exposed many people to the RV lifestyle that may not have considered it previously,” he says.

There is little evidence of a marked increase in aftermarket or secondhand van sales that would suggest holidaymakers are reconsidering their purchases and trying to offload them, says Luke Chippindale, government relations manager for the Caravan Industry Association of Australia.

However, he says there are some in the industry concerned they are facing less exuberant buyers: “Certain sections of industry believe we are approaching a cliff, but others say they haven’t seen trends in that direction.

“There’s some tightening of sales because of cost of living pressures, but it’s a modicum of decline that is not enough for the industry to be worried about at this stage.”

That’s not the case with used car sales, however.

Moody’s Analytics’ Used-Vehicle Price Index shows month-to-month and year-to-year declines in used car prices, although the fall was less marked in January. Prices are down 11 per cent since their all-time peak in May 2022, the index says, but they are still nowhere near pre-pandemic levels – and that’s tough for secondhand buyers.

As household spending tightens and home owners cut costs to pay their mortgages, Moody’s expects used vehicle prices to continue to fall. “Prices are expected to fall by slightly more than 10 per cent over the year,” it says.

Carsales chief McIntyre is more cautious. “We haven’t observed any noticeable decline in used car pricing across either private sellers or dealers,” he says. “I expect prices will hold at this level for some time. But they may come down a little bit.”

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