The Datium Insights-Moody’s Analytics Used-Vehicle Price Index continued its downward trajectory in December, marking the eighth consecutive decline. This trend is attributed to a combination of supply and demand factors. On the one hand, vehicle supply increased. On the other hand, demand was subdued as household spending decreased 2% year over year on a per capita basis during the third quarter.
Regarding supply, the total availability of vehicles continued to rise, leading to unprecedented sales figures in 2023. The Federal Chamber of Automotive Industries (FCAI) reports that Australia recorded over 1.2 million new-vehicle deliveries during this period—an all-time high that reflects the easing of supply-chain disruptions. Many of the vehicles sold in recent months were ordered several months ago and delivered only recently. After the recent years of supply-chain disruptions, Australian consumers can choose from a diverse array of vehicle options, indicating a robust and well-stocked market.
While global vehicle production in Europe and Asia has yet to reach pre-pandemic levels, there was a notable improvement as China spearheaded the increase in supply. Japan’s vehicle production rose 19.7% compared to last year, but was still 9% short of 2019 levels. In contrast, Chinese auto production grew 7.4% up until August (the most recent data available) compared with the same period in 2022. Remarkably, this is 14.4% higher than the corresponding period in 2019, before the COVID-19 pandemic.
Moody’s Analytics projects a continued decline in prices within the used-vehicle market in Australia.
Catarina Noro, Associate Economist, Moody’s Analytics
However, this descent is expected to be less steep when compared with 2023, with the average market price predicted to fall an additional 8.1% after having declined 9.3% in 2023.
While the high interest rate environment and stricter financial conditions may curtail vehicle demand, any price weakness should be less pronounced than in recent years as supply chains normalise.
Risks to this forecast are largely skewed to the downside. Several advanced economies have seen a deceleration in growth due to the swift application of rigorous monetary policies to address inflation. If the deceleration in either global or local economic conditions is more severe or prolonged than anticipated, this could suppress demand for new and used vehicles, leading to further price reductions.
Conversely, there is a possibility for car prices to remain flat or even increase. If the anticipated slowdown in demand doesn’t materialise as rapidly as projected, prices in the used-vehicle market could sustain their high levels for a period. Additionally, even though the production of new vehicles is on the rise, any decline in output could impose an upward pressure on prices.
