The new car scene in Israel

In terms of getting to grips with the realities of the marketplace of my new home, the following article from Globes is very helpful.

Record new car deliveries in Israel in 2014

2014 ended with a whimper in the Israeli auto market – less than 10,000 new vehicles sold in December. However, even without December, a traditionally weak month because vehicle leasing companies and private customers postpone purchases to the beginning of the following year, a new all-time record was set in 2014.

240,000 new private vehicles went on the roads in Israel during the year, with households, leasing companies, and various financing institutions spending NIS 23-25 billion on new car purchases alone.

The main reasons for the high figures are clear: the lower prevailing interest rate enabled many people to buy a new car with long-term financing and almost none of their own money, competition in the market pushed prices down, and the entry of more leisure models and mini-models at relatively low prices lowered the threshold for entering the new vehicle market for many people.

Without spoiling the party, we noted that this is not organic growth resulting from an increase in the economy’s power and the economic prosperity of households; it is primarily the inflating of a financing bubble, which raises the market risk in the event of collapse in the used car market.

South Koreans rule the market

In a division by brands, the dominance of the Israeli auto market by the South Korean brands stands out: Hyundai Motors, which owns the Hyundai brands (first place with 31,376 vehicles) and Kia Motors, its subsidiary (third place with 26,365 vehicles) jointly account for 24% of the market – an almost unprecedented market share for a single global auto manufacturer.

Adding the market share of Chevrolet, which finished in eighth place with 12,100 deliveries, brings the leading market share of South Korean cars to almost 30%.

Toyota set an all-time record for its sales in Israel with 27,834 vehicles, putting it in second place. Mazda made a respectable comeback to fourth place with a 61% rise in deliveries, albeit still far from its sales during its peak years. Skoda (fifth place) was the leading European brand, riding a rising tide of demand from leasing companies. Suzuki (sixth place) dominated the small cars and recreational vehicle segment with an increase of almost 30%. Mitsubishi (seventh place) staged a stunning comeback with its small new cars, recording 13,141 car deliveries, more than double the previous year’s number. Chevrolet almost doubled its sales this year, while Nissan and Renault remained fairly stable.

Business groups: a cash cow

In a breakdown into business groups, Colmobil, with all its brands, continues to lead with 44,517 vehicle deliveries, giving it an 18.6% market share. The group does not publish its financial data, but taking into account the high profit margin on the luxury Mercedes Benz brand and the profits from Hyundai resulting from the extremely low shekel-dollar exchange rate during most of 2014, it can be assumed that the group’s profit this year was again in the hundreds of millions of shekels, not including, of course, its profits from its strategic holdings in Mobileye(NYSE: MBLY).

Champion, the Israeli representative of the Volkswagen group brands, finished in second place in the market with a 12.8% market share, again generating an impressive return for a mutual fund from Jersey Island, its controlling shareholder. Toyota importer George Horesh finished 2014 most satisfactorily with an 11.8% market share and a record profit. For the first time, Toyota has abandoned its traditional policy of artificially restricting the supply of vehicles to its importer in Israel, and has opened the spigot all the way. Delek Motors made a fine profit this year, even without its profits from the Mobileye IPO, although its 11.4% market share is less than half of what is was during the preceding decade. Telcar polished its Kia diamond, which it came across in a pile of dirt less than a decade ago, and which it made into a brand with 11.1% of the market.

Trends: More luxury and recreational vehicles

With almost no exceptions, the luxury brands made hay in 2014, despite the luxury vehicles tax imposed at the end of 2013, and despite the pro-social pressure in the media. Audi bombarded the market with over 2,500 deliveries, and Mercedes Benz put 1,985 new vehicles on the road, BMW added 1,733 vehicles, a third of them being jeeps and recreational vehicles. Lexus doubled its sales with 1,000 deliveries, Volvo posted fine growth, US brand Jeep multiplied its sales many times over, and Cadillac also doubled its sales.

The Israeli customers did not only buy more cars; they also switched to vehicles with more presence and status. The small jeep segment, for example, which began from scratch four years ago with a single competitor (the Nissan Juke), this year became a super-competitive hit, with deliveries skyrocketing 67%, compared with 2013. The Suzuki SX4 led this segment with 8,100 units, more than triple the next most popular model. The medium-sized recreational vehicle market, in which prices start in the neighborhood of NIS 150,000, also achieved respectable 30% growth, in comparison with 2013. At the top, the Mitsubishi Outlander overtook the Mazda CX-5, the traditional leader.

In the family-sized car segment, the Corolla and Auris duo led the sales table with 16,500 deliveries. If the family-sized cars delivered by Hyundai and Kia are combined, however, we get almost a tie at the top between Hyundai and Toyota.