Moody’s Analytics reveal another drop in Used Vehicle Price Index for September 2023

Not surprisingly, sales of used vehicles in September 2023 presented as another decline in the price of used vehicles across the country. This trend is primarily driven by the expansion of worldwide automotive production, leading to a reduction in price pressures within the second-hand vehicle segment. The downward trajectory in prices is evident across both the passenger car and truck/SUV categories.

However, the rate of depreciation in the value of Utes surpasses that of passenger cars. This discrepancy can be attributed to strategic production decisions taken by manufacturers in recent years, which saw a considerable reduction in the output of passenger cars.

In response to supply-chain limitations, manufacturers have shifted their focus towards the production of larger vehicles, which typically yield higher profit margins. This strategic reallocation of resources has further exacerbated the price differential between Utes and passenger cars in the used vehicle market

The global automotive sector, while yet to fully recover to pre-pandemic output levels in Europe and Asia, is nonetheless demonstrating considerable resilience. China’s rapid transition away from its zero-COVID policy is anticipated to provide a significant boost to global automotive supply chains in 2023 and extending into 2024.

Chinese auto manufacturing, despite experiencing a dip in July, has maintained a production rate 50% above levels from the beginning of the year, indicating robust sectoral growth. The Federation Chamber of Automotive Industries (FCAI) highlights an emerging trend in the Australian market, where Chinese-made vehicles are increasingly gaining market share.

Specifically, sales in August 2023 exhibited a substantial 130% year-on-year increase, underscoring the growing significance of Chinese auto production in international markets.

Tighter financial conditions combined with increased supply of new vehicles will relieve the inflationary pressures in the used-vehicle market for the rest of the year. Moody’s Analytics projects that used-vehicle prices will fall through 2023 and into 2024 as the supply of vehicles increases and demand slows. Prices are expected to fall 9.5% in 2023 and a further 8.7% in 2024 before stabilising in 2025.

Moody’s Analytics has factored in an economic forecast that is skewed towards potential downside risks. And makes the proviso that if the global economy underperforms, its adverse effects on the Australian economy could trigger a sharper and quicker drop in demand, and consequently, a faster decline in prices than currently projected.

On the flip side, there’s a growing risk that the expected slowdown in demand might not materialise as quickly as forecasted, which could sustain high prices in the used-vehicle market for an extended period. Additionally, if the enhancement in the production and import of new vehicles does not materialise as predicted, the dip in used-vehicle prices could also be less pronounced than initially projected.

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