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ESC technology to be mandatory

The used car market is preparing for a regulatory change next March that requires all used vehicle imports to be fitted with Electronic Stability Control (ESC) technology. The regulation applies to light commercials, and passenger vehicles with engines under two litres. A similar regulation two years ago was applied to passenger vehicle imports with engines over two litres.

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The bulk of New Zealand’s used imports is made up of small cars so the change will have a significant effect. ESC was progressively introduced to small cars in Japan from about 2012. The regulatory change will effectively mean that most small cars made more than seven years ago, can no longer be imported.

Levin car dealer Nathan McColl believes next year’s requirement for ESC in used imports will bring more hybrids and European models into New Zealand.

He says many of these older cars were fitted with ESC technology and may well be attractive to New Zealand traders supplying buyers in the modest price ranges.

Ross McColl Cars has been in business for decades and founder Ross McColl is still a big part of the company. He and son Nathan reckon they’ll just ‘”go with the flow” when the new regulation takes effect in March.

They have no plans to bring in a lot of stock beforehand. Nathan says if everyone brings in extra stock then it is just as likely to lead to a price drop. “It’s better to be selective about what you import.” He’s starting to get price lists now from companies in Japan that state which vehicles are equipped with ESC.

Like other dealers, he’s expecting the first few years under the new regime to be a little tight as buyers adjust to higher prices. “And if import numbers drop significantly this will have a flow-on effect to the compliance sector, tyre sales and others.”

Ross McColl Cars targets a local market that has a large population of older people on fixed incomes.

“We trade mostly in the $7,000 to $12,000 price bracket and these prices will have to shift up a bit to reflect the later model cars that will be imported. But by 2025, people will be back buying cars made 12 or 13 years earlier.”

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MTA Sector Manager Tony Everett believes the market will adjust, as it has to other regulatory changes. “It may open the way for the import of more hybrid vehicles from Japan, because even the older ones were fitted with ESC. Demand for hybrids is growing in New Zealand and there is certainly plenty of choice in Japan.”

Hybrids made up around 20 percent of the Japan new vehicle market back in 2012 and this has grown to over a third of all vehicles sold today.

The consensus within the New Zealand sector is there will be a shift in the business model at the lower end of the New Zealand market. Customers whose top price is around $5,000 to $6,000 will have to choose from stock already in the country, as this will no longer be the entry price for used imports. “The value of cars in this price range may firm a little,” says Tony.

Meanwhile, used import dealers who focus on the lower price market segment will have to change their business strategy. Some might even quit the industry - for a while.”

Dealers who rely on used imported vans within their business model will also be affected as almost none of these vehicles were fitted with ESC technology until very recently. “Fresh used import Toyota Hiace vans will almost certainly disappear from the market.”

However, he says the shift won’t do much in the short term to reduce the average age of the national fleet (14.2 years).

“What it will do is stop the importation of older smaller vehicles. At the moment, we are still importing many that are between 10 years and 14 years old.”