In a recent episode of the Fleet News Group podcast, Marc Sibbald sat down with Mike Costello, Corporate Affairs Manager at Cox Automotive Australia, to discuss the current state and future of the automotive industry. With a background in automotive journalism, Costello brought a wealth of knowledge to the conversation, shedding light on various aspects of the market, from used car trends to the rise of electric vehicles (EVs) and the increasing popularity of Chinese car brands in Australia.
The role of Cox Automotive
Cox Automotive Australia, a subsidiary of Cox Automotive Inc. based in Atlanta, Georgia, is one of the world’s largest vehicle services companies. In Australia, the company is best known for Manheim, an auction house for passenger and commercial vehicles. Fleet companies often send their vehicles to Manheim auctions to be sold at wholesale prices to dealers or the general public. Costello, who has been with Cox Automotive since the beginning of the year, emphasised the company’s extensive reach and diverse services, including software solutions, retail data, inventory management, and finance integrations.
Trends in the used car market
Costello highlighted significant changes in the used car market over the past six months, driven by increased supply. During the COVID-19 pandemic, used vehicle prices soared due to shortages. However, as supply has improved, prices have softened, especially for SUVs, which are now oversupplied. Traditional passenger cars, on the other hand, have maintained higher prices due to their reduced presence in the market.
Interestingly, the market for older vehicles remains strong, with prices staying elevated. This trend is largely driven by economic factors such as higher interest rates and inflation, which push consumers towards more affordable, older vehicles. Costello noted that eight to ten-year-old passenger cars have nearly doubled in price over the last five years, indicating high demand and limited supply.
The rise of electric and hybrid vehicles
The conversation then shifted to electric and hybrid vehicles, a sector experiencing rapid growth and change. While hybrids are performing well in the used market, EVs are struggling with residual values. Factors such as technology obsolescence and the introduction of more affordable new models from Chinese brands contribute to this trend. Costello is optimistic that as battery technologies improve and the market becomes more populated, EV residual values will stabilise.
Plant equipment market
Cox Automotive also deals with the industrial and plant equipment market, including sectors like transport, mining, and agriculture. While this market enjoyed strong returns in 2023, it has recently shown signs of softening. Issues such as quarantine delays for imported heavy industrial assets have contributed to this trend. Despite this, there is still a significant amount of industrial equipment available in the market.
Fleet Managers and market timing
For Fleet Managers, Costello advised that now is a good time to sell used fleet vehicles. While the market has stabilised, it is unlikely to return to the high prices seen during the peak of 2022. Moving vehicles sooner rather than later will yield better returns as vehicles are depreciating assets. With improved supply, Fleet Managers are now better positioned to replace their old vehicles with new ones.
The emergence of Chinese car brands
A significant portion of the interview focused on the rise of Chinese car brands in Australia. Brands like MG and BYD now account for 11% of the market, a significant increase from just a few years ago. Costello explained that Chinese EVs are often superior due to extensive government investment in the sector. As a result, Chinese brands are becoming more competitive, offering affordable, high-quality vehicles with long warranties.
Vans vs. Utes
The discussion also touched on the ongoing debate between the popularity of dual-cab utes and vans for tradespeople and fleets. While utes are popular for their versatility and appeal as lifestyle vehicles, Costello suggested that vans are often more practical for tradespeople. Vans offer better security for tools and equipment and are designed specifically for work purposes. However, the cultural and aspirational appeal of utes in Australia continues to drive their popularity.
It was a great chat with Costello who provided valuable insights into the current trends and future directions of the automotive industry in Australia. From the evolving used car market to the rise of electric vehicles and Chinese brands, the industry is experiencing significant changes. For Fleet Managers and consumers alike, understanding these trends is crucial for making informed decisions in this dynamic market.
For more insights you can listen to the full podcast on Spotify, YouTube, or Apple Podcasts.
You can also follow Mike Costello on LinkedIn where he regularly shares his thoughts and industry analysis. As the automotive landscape continues to evolve, staying informed will be key to navigating these changes successfully.
