New brands spark ‘feeding frenzy’
Colonial Motor Company’s chairman has warned the number of new Chinese brands entering New Zealand’s light-vehicle market is unsustainable and not all of them will survive.
Ashley Waugh says there has been an interesting shift in the dynamics of the domestic market for some years and Colonial has “joined it in a measured way”.
“The arrival of many new Chinese-sourced brands and products in the light vehicle market is a continuing ‘feeding frenzy’,” he adds.
“These brands are all looking for property and facility representation and make no mistake, many of these are very good products, are value for money and the best will survive and thrive, but there will be casualties. They cannot all survive in a small vehicle market like New Zealand.”
His comments were made to shareholders at the company’s annual meeting in Wellington and he notes Colonial has “always felt that ‘less is more’ when it comes to strategic direction”.
“We do have the JAC brand and a BYD dealership in New Plymouth but our exposure [to new Chinese brands] is somewhat limited,” continues Waugh, pictured.
“The next five years are going to be very interesting in this space and will continue to bring challenges to the industry.
“There is an air of certainty that we will need to occupy a place in the Chinese-sourced market.
“A second outcome would be our existing brand partners continue to adapt, evolve and rise up to meet the market’s evolution and the opportunities new technologies bring. Most likely both scenarios will play out.”
Financial results
Waugh also told shareholders, while reflecting on Colonial’s financial results, that “under the prevailing circumstances, your company performed well over the past year”.
He explains its trading profit after tax of $17.8 million on turnover of just over $1 billion dollars reflected the challenging environment for all its key market segments of light vehicles, heavy trucks and tractors.
“These results were well short of our stellar performance in the immediate post-Covid period, but for good reason,” he adds.
“The New Zealand economy inevitably had to pay the bills for that period, the country fell into negative growth and with a high-interest-rate environment, our markets, indeed our business, was not immune to the flow-on effects of that depressed economy.
“We indicated at the time that monthly trading was ‘tough’ in an over-supplied vehicle market that came with a very high inventory carry and high interest rates. Make no mistake, our trading world had changed significantly.”
Waugh says Colonial’s management has responded well to these challenges and results of the past two years have proven having a strong balance sheet and being able to react quickly meant it could address the cost of doing business at a grassroots level.
“This enabled the company to weather what will hopefully be the worst of New Zealand’s economic storm.”
More cash for directors
Shareholders at the November 7 meeting voted to re-elect John Journee, John Hutchinson and John Beveridge as directors of the company.
A resolution to increase the total annual remuneration payable to directors from $330,000 to $515,000, with effect from July 1, 2025, was also passed.
All measures, along with reappointing Grant Thornton as auditor, received about 90 per cent of support and about nine per cent of shareholders abstained from voting.
Waugh acknowledges the larger annual pool for directors’ fees “is a substantial increase that requires an appropriately detailed explanation”.
“It is very important we have an eye to the future structure of the board. This requires attention to the skills and experience that sit around the table and the culture of the board, which in my personal view is one of the best boards I have ever worked with,” he told shareholders before they voted.
“There are changes coming over the next year or two that will see both myself and Graeme Gibbons retire. The fact is a very substantial amount of long-term industry experience will transition off the board by November 2028.
“The board, therefore, believed that introducing a third, highly experienced independent director at an early stage would significantly assist with that transition. This brings with it the inevitable cost of adding a non-executive director.”
He says a decision will need to be made in the future whether the board stays at seven or reduces to six directors, but the board currently supports the higher number to assist in the transition over the next couple of years at least.
“From a purely practical aspect, we also have the cost effect of Stuart Gibbons moving out of his management position but remaining as a director,” explains Waugh.
“This has the effect of needing to fund six non-executive directors, rather than only four, from the approved pool of funds. As the now sole executive director, John Hutchinson does not receive a director’s fee.
“To put this in perspective, funding the two additional non-executive director costs account for 80 per cent of the increase sought for approval by the resolution.
“The two-yearly review of fees we traditionally carry out accounts for the balance of the increase.”
He adds company uses the independent, external Strategic Pay survey of directors’ fees for similar-sized companies in terms of number of people, market capitalisation and turnover to decide fees.
“Colonial usually aligns to the midpoint of that survey and this year our recommendations are approximately 90 per cent of that midpoint, as the market has moved quite considerably.”
Key people
Waugh took time to recognise the dealer principals (DPs) who have left or are leaving Colonial this year, describing those filling such roles as “the most important cog in our organisational design”.
“We have been well served by many professional and successful DPs over a very long period of time,” he adds.
“Right now, we are going through a significant period of change, as some of our long-serving DPs move on to their well-deserved retirements.”
These included Keith Allen, who worked his way up from the parts department as a “junior” to become DP at Fagan Motors in Masterton. He was retiring after 43 years with Colonial.
Another rural dealer to retire this year was David Wills from Ruahine Motors in Waipukurau, where he spent 13 of his 32 years in the automotive industry.
Meanwhile, John Luxton had served Colonial for 35 years and his roles had included being fleet sales manager at Hutchinson Motors in Christchurch before being a DP at Te Awamutu, Invercargill and, finally, Avon City Motors in Christchurch
Waugh also highlighted that Stuart Gibbons was stepping away from his management role at the group but will remain a director of the company. Gibbons began his Colonial career in Morrinsville as an apprentice technician and was also a DP at a site in Lower Hutt, which was originally called Stevens Motors.
“Stu led the strategy and design phase of our Wellington region hub and spoke representation plan that saw Capital City Motors established in Lower Hutt, with branches and service facilities now throughout Wellington and the Kapiti Coast,” adds Waugh.
Outlook
Looking ahead, Waugh says the board is pleased with the results the company posted in tough times.
“In the event we may be starting to enjoy improving market conditions and economic growth, we are well placed to capitalise on these,” he notes.
“The half-year to date has been encouraging by starting on a positive note. What looks to be an improving market will play out one way or other in the remaining two months still to run of this first half of the financial year.
“It is too early to make a prediction or provide an update that carries certainty, but unlike my address to last year’s annual meeting, there do appear to be ‘green shoots’.”
Chief’s views
Alex Gibbons, chief executive, told the meeting that Colonial plans to continue investing to develop the resilience and scale of its operations.
This will include developing new digital tools to drive used vehicle integration and capability group-wide and maintaining balance to ensure used cars continue to complement new car operations.
He says first-quarter business has resulted in a positive start to the 2026 financial year, “with trading trending in the right direction”.
“The market and economy remain patchy and the company continues to observe a two-tier recovery between rural and metro markets,” he adds.
“Lower interest rates and a degree of buoyancy in the agricultural sector can only be seen as a positive sign for New Zealand. Cautious optimism, a good start but three quarters remain.”
