Australians looking to buy a reasonably priced car may need to wait for another two years for prices to go back down, and even then, its unlikely to go down to pre-pandemic prices.
Ajay Bhatia, the managing director of Carsales Australia, told The Epoch Times that he believes car prices have plateaued and will remain elevated for the next two years.
“What happens in 2024 is anyone’s guess, but in 2022 and 2023, prices will likely stay high,” he said.
A global supply shortage of semiconductor chips caused by supply chain issues has also caused the value of second-hand cars to skyrocket over the past two years, rising 40 percent during the pandemic, according to Carsales, as consumers paid premium prices to have immediate access to their purchase.
In cases where the used car had “fairly low kilometres” and was manufactured within one year, it would go for higher than a new car of the same model.
“I actually bought a car nearly two years ago and its just being built next month,” Bhatia said, illustrating the extent of the backlog of manufacturing orders, driving up the used car market.
Bhatia said the supply chain issues will begin to ease later this year and then recover throughout 2023.
“But there’s always a lag in terms of prices,” he said. “If someone’s holding out to buy a car, they have to hold out for a very long time.”
Consumers worried about further price hikes due to current inflation issues can be assured that it will not have much of an impact.
“Most of the OEMs (original equipment manufacturer) have already put up prices for cars. Inflation has already hit [the car market],” Bhatia said. “It’s already happened. If anything, I would imagine the price of cars would be a major contributor to increased inflation.”
However, as Australia has zero domestic car manufacturing capability, customers are completely reliant on the overseas manufacturers to resolve their supply chain issues.
“The question is not only when there will be sufficient supply to meet normal demand, but when will supply catch up with the cumulative shortage that continues to build up,” the report said.
COVID-19 lockdowns also heavily changed how consumers purchased their vehicles, with many flocking to websites such as Carsales, due to the inability to go to a dealership.
“And traffic started to boom at that point of time. Traffic today is still much higher than pandemic levels,” Bhatia said.
Further, the COVID-19 pandemic caused the emergence of number of factors that impacted the demand for cars, including an avoidance of public transport and a better economic situation due to higher level of savings from government assistance and low interest rates.
Lockdowns also meant consumers had more time to look up information on their dream car, with Carsales research revealing that on average, people are spending three to four times longer on research.
Meanwhile, if current record-high fuel prices remain elevated, Bhatia said it would accelerate the push to hybrid cars and electric vehicles.
But he noted that the unaffordability of EVs remain as a barrier to entry for the average Australian.
