Welcome to the Boost Auto annual predictions. 2024 is a year best forgotten by many of us; at least local economic indicators are pointing for a slightly better 2025. Looking ahead though, other than an improving economy, what can we expect? Here are Boost Auto's thoughts and predictions for 2025.
1. Price Wars in the Entry-Level Market
The 2025 Clean Car Standard (CCS) will make cheap cars more expensive, unless they are electric. The revised CCS rates will hit entry level models hard, as typically they use older tech which makes them pollute more, that in turn means they have a higher CCS penalty.
There is still a slew of new entrants eying up the local market and hoping for a slice of the pie. They won’t want to miss out on reluctant consumers, and so they will enter the fray with aggressive pricing. No one likes to give up market share without a fight.
This is already playing out in Australia, where the introduction of models like MG4 and BYD Dolphin has led to aggressive pricing strategies, helping to drive down costs for consumers in the budget category.
Don’t think that the price-fighter 2024 MG3 at $19,990 will be hold off any new entrants; that car cops a $5200 penalty in 2025, and so will likely stop being imported. Do expect a lot of value packed entrants in the $25-30K small to medium SUV landscape, especially ones with low emissions engines.
Locally 2024 saw significant price cuts for electric vehicles across mainstream brands due to huge oversupply as a result of the abolition of the Clean Car Rebate being scrapped and the introduction of RUC. GWM Ora for $25K anyone?
2. Increased Focus on Emissions Management
Emissions management and testing will come back into sharper focus. In Australia, the government has introduced stricter emissions standards to align with global expectations, with penalties for manufacturers who exceed these limits. Similarly, New Zealand's Clean Car Standard (CCS) will push local distributors to adjust their inventory to meet tightening emissions regulations for new vehicles.
The government’s new Transport Minister will look for low-cost ways to reduce vehicle emissions, and will likely land on the in-service fleet as a target, as well minor tweaks to CCS fees and or targets. New Zealand remains one of a very small group of developed nations without an in-service emissions test. The wide adoption of OBD2 ports and emissions management in Euro IV cars and later make emissions testing easier to implement. Expect our aging polluting fleet to come under the microscope, as ministers look for easy wins on emissions reductions.
3. Challenges in BEV Sales and New AC Levy
Battery electric vehicle (BEV) sales are expected to remain sluggish locally in 2025, hindered by factors such as the newly introduced ACC levy in New Zealand, on top of RUC. Sometimes the signalling is more important than the dollars.
Despite the fact that a new EV today costs significantly less than the same car would have cost in December 2023, the share of EV sales has fallen from 27.2% in 2023 to 11.2% of passenger cars in 2024. Current policy looks decidedly anti-EV even though it is unlikely that that was intended. 2024 EV performance was on the back of strong discounts, but stocks of these aging vehicles will deplete, and EV prices will creep upwards to a more sustainable level. This will put pressure on demand, and suppress EV sales in 2025.
4. Pressure on the Government to Support Electrification
With the share of EV sales falling the government is likely to miss its Paris Climate Accord commitment. The collation will feel pressure to adjust its policies in a way that makes the miss more acceptable. However, its already painted its way into a corner with the wholesale abolition of the ‘ute tax’, and so is running out of fiscally prudent options.
There are still some demand-side incentives, such as tax credits for businesses, or emissions based licence (rego) fees, or expanded charging infrastructure, that could be explored to support the transition to cleaner vehicles. Don’t expect anything too radical though.
5. Hydrogen Vehicles: A Glimmer of Hope, But Limited Impact
While hydrogen-powered vehicles are being touted as a potential solution for heavy transport and high-performance vehicles, they are unlikely to see mainstream adoption in New Zealand in the near future. Globally, hydrogen adoption has been slow, with only 3,000 hydrogen vehicles on the road in the U.S. by the end of 2023. Similarly, in Australia, while companies like Hyundai and Toyota have introduced hydrogen fuel cell vehicles, the lack of refuelling infrastructure has limited their uptake. In China, hydrogen has found some niche applications, but electric vehicles remain the primary focus for both consumers and manufacturers.
6. Aging Vehicle Fleet Gets Older
As new vehicle prices rise in line with the tougher CCS rules for 2025, and the transition to cleaner vehicles faces hurdles, New Zealand’s vehicle fleet will continue to age. This is an untended consequence.
Data from the Australian Bureau of Statistics shows that the average age of vehicles in Australia reached 10.5 years in 2023, whereas in New Zealand it is now just passed 14 years.
If new cars and used imports become more expensive, average vehicle age is expected to rise as consumers hold on to their cars longer. This won’t help our emissions targets, but will increase the demand for specialist servicing and repairs, which could be an opportunity for service chains to expand their offerings.
7. The Rise of Specialist Service Chains
In response to the aging fleet, the rise of specialist service chains will become more prominent, offering tailored maintenance and repair services. In Australia, companies like UltraTune and Midas have expanded their footprint in recent years, capitalizing on the aging fleet and increased demand for affordable servicing. New Zealand dealers and distributors may follow suit, with companies like Turners likely expanding their service operations to cater to the growing need for trusted maintenance and repairs, particularly for older and less technologically advanced vehicles.
Expect the established tyre shops to expand their offering for quick fit style fixed price servicing, offering increased trust and transparency for pricing for servicing of 5-10 year old cars.
8. Challenges for PCPs (Personal Contract Plans) / GFV products
Personal Contract Plans (PCPs) may face challenges as concerns over residual values increase. Data from the U.S. shows that lease terms and financing structures are becoming more complex, with an increased focus on the potential residual value of vehicles. In 2023, leasing accounted for 30% of all new vehicle transactions in the U.S., but residual value risk remains a major concern for both consumers and financiers. In New Zealand, similar challenges will likely affect PCPs, with increasing vehicle prices, unpredictable used values and shifting market conditions causing uncertainty in residual values.
9. Ute Wars and Competitive Pressures
The entry of new players like BYD and Kia into the ute market will escalate the “Ute Wars” in New Zealand, a trend already seen in Australia. Australia’s ute market has become fiercely competitive, with brands like Toyota, Ford, and Mitsubishi fighting for dominance. The introduction of more fuel-efficient and electric utes will further intensify competition, especially as there is pent-up demand for cleaner alternatives.
10. Global EV Success Stories and New Zealand’s Transition
In 2024, the world sold 3.5 million more EVs than it did in the previous year, according to a new report by Rho Motion. This increase is larger than the 3.2 million increase in EV sales from the previous year – meaning that EV sales aren’t just up, but that the rate of growth is itself increasing.
In China, BYD and NIO have seen rapid growth, with BYD becoming the world’s largest EV manufacturer in 2024. Volvo reported a 68% increase in global EV sales in 2024, positioning itself as a leader in the electric transition.
China experienced the largest growth at 40%, with North America growing by 9% and the “rest of the world” growing at 27%.
In New Zealand, while EV adoption is slower, and increasingly out of step. These global trends will inevitably influence the local market as dealers and distributors work to align with the broader shift towards electrification.
One brand who did have a tough year last year was Telsa; their sales were down 1%. In 2023 Model Y was the best selling car in the world! It dominates most markets it operates in. It’s hard to say whether the brand has a mild fever or the flu. An aging line-up and the increasingly diverse leader aren’t ingredients for a healthy brand. The Lemsip hasn’t been administered yet, and so its hard to say how their 2025 volume will play out. But their volume matters.
12. Still more New Entrants on the Horizon
Lastly, we can expect more new entrants to enter the New Zealand market in the coming years, further diversifying the competition and shifting the landscape. As global players look to capitalize on New Zealand’s growing EV market, companies like Tesla, BYD, and even Chinese electric vehicle startups could play a larger role. In Australia, the rise of Chinese brands like GWM, MG, BYD, Zeekr, Deepal and Leapmotor has already transformed the competitive landscape, and similar changes are expected in New Zealand.
13. Stellantis gets bought out
On a global scale we predict a couple of left field possibilities. Stellantis has a massive portfolio of brands, that it is still working through how to best manage. It also has access to global markets, in a way that most Chinese brands don’t, with the exception of Leapmotor, for obvious reasons. Would the management team reject a bid from one of the big Chinese brands? The Leapmotor distribution deal was genius for both companies. Maybe the next move on Stellantis could be breathtaking.
14. Foxconn enter the market as a contract manufacturer
Move over Magna Steyr, contract manufacturer to Mercedes-Benz and 10 other OEMs, here comes Foxconn; your gateway to the US and European market for Chinese brands.
We already know they have car plants (they bought a GM plant on Ohio), and that they are great at contract manufacturing (they are the principal makers of iPhones). Imagine Chinese brands getting a foothold in US and European markets through Foxconn, and thus avoiding 100% tariffs. Foxconn are developing their own car too, but just maybe contract manufacturing will be part of their play.
Please credit Boost Auto if republishing parts of this article.
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