Due to the war in Ukraine and the microchip crisis, there is more demand than supply for vehicles, which also increases the price of used vehicles
The microchip crisis together with the slow economic recovery, exacerbated by the uncertainty arising from the international context and the war in Ukraine, are fundamental factors for the evolution of new vehicle sales. The main manufacturers are affected by production stoppages in their factories due to the lack of components, and this situation is transferred to dealers, where the cars requested by potential customers do not arrive. Depending on the make and model, delivery times can exceed three months.
A consequence of the lack of vehicles at dealers is the increase in prices, also prompted by the general increase in the consumer price index (CPI). In the case of cars, it was 6% in the inter-annual rate during the month of April, which means exceeding historical maximums, according to data published by the National Institute of Statistics (INE).
As early as March, the automotive CPI stood at 5% year-on-year, surpassing the highest to date recorded in March 1996 when it rose to 4.9%.
From the industry, they explain that the increase in the price of cars is in line with the increase in raw material prices and is also justified by the shortage of product supply caused by the crisis in the semiconductor supply, which has led to an increase in prices both new and used models.
During the first four months of the current year, the price of cars increased by 4.8% compared to last year, while recording an increase of 1% compared to last month.
From Faconauto, they explain that «this fact presupposes a major headache for the automotive sector. As early as January 2022, before the Russian invasion, 71% of dealers said they were concerned about price escalation, also citing the second-hand market. The association that unites the official dealers does not predict a very positive future as “with the war in Ukraine, inflation is more marked than expected and the rise in the price of raw materials is expected.” These include fuel, natural gas, nickel, palladium, iron or steel.
Of the Association of Manufacturers (Anfac), they believe that “in addition to the uncertainty and economic crisis caused by Covid-19, we have added the shortage of product due to the lack of semiconductors and bottlenecks in logistics.”
High prices and delivery times are two of the factors responsible for the increase in demand for used vehicles, although in this market we again have the problem of lack of units and more expensive vehicles.
For example, the average price of used cars in April stood at 12,238 euros, 15.2% higher than in the same month last year, according to data from the Association of Vehicle Dealers (Ancove). For used passenger cars older than eight years, the increase was 14.5%, with an average cost of 9,357 euros.
The profile of the best-selling car in Spain during the first months of 2022 is that of a used car, diesel and more than 10 years old. According to Ganvam data, these sales represented 60% of the pre-owned business in the first four months, approximately 360,000 units. According to this organization, 50% more passenger cars older than 10 years were sold between January and April 2022 than new ones, “which clashes with the European Union’s idea of decarbonising its vehicle fleet.”
According to the National Association of Motor Vehicle Sellers (Ganvam), the second-hand market is a reflection of the new one and, while it is more stable, it is also suffering the effects of the lack of supply caused by the chip crisis. In this way, a gap is created in the supply of used youngsters because companies and rental companies do not ‘make’ these models because they cannot renew their fleet. “This situation, combined with the long wait times to receive a newly registered car and the price increases vehicles are experiencing due to rising demand paralleled by a decline in supply, has led to a boom in interest in older models.” These have more competitive prices and are not affected by the chip crisis or delivery times,” they explain from this organization.
But the boom in vintage car sales has its counterpart. The EU’s Environment Committee has voted to ban the sale of diesel and petrol vehicles from 2035, with the aim of banning vehicles with emissions from driving by 2050. As interest in cars over 10 years old grows, the EU’s decarbonisation target becomes less effective. Of Ganvam, they believe that “an effective scrapping incentive plan is needed that allows for the retirement of cars over 15 years old and facilitates access to an efficient vehicle, such as those less than 5 years old, to reducing emission levels until 2050, polluting vehicles will no longer be on the road”.
Protected by the current situation, the brands are clearing out their production lines, allowing them to maintain greater control over the offering and thus maximize their corporate profits.
They have the perfect demand (everything sold), socio-sanitary (paralysis of plants through confinement) and geopolitical framework (supply chain bottlenecks, conflict in Ukraine) to justify production cuts without fear of the political-fiscal consequences this would have in a pre-pandemic setting. The ironclad regulatory and technological constraints to which the industry is subject are contributing to the gradual disappearance of the affordable car as we have known it until now.
Sales by volume are a thing of the past, the industry’s new mantra is to maximize profitability per unit sold and the higher its price, the greater the profit. The unstoppable price rise is a perfect example of chaos theory, as is the very delicate global industrial equilibrium.
Community authorities themselves assume that a significant proportion of the population will have to rethink their mobility needs and will not have access to this third wave of technology electrification of new vehicles. Many of them will have to move into the first and second generation electrified second-hand markets, so this increase in potential demand will drive their prices up even more given the scarcity of their supply.
BY: IGNACIO GARCÍA ROJI, Automotive Market Analyst at SUMAUTO
It’s not just cars that have become more expensive. For motorcycles, the increase in the first four months of 2022 was 4.8%, up 3.4% from last month. Spare parts and accessories also increased by 6.4% in April compared to the same month last year, 0.6% month-on-month and 3% so far in 2022.
And vehicle maintenance and repair services ended April with a 3.6% increase compared to the same month in 2021.
Source: La Verdad
I am Ida Scott, a journalist and content author with a passion for uncovering the truth. I have been writing professionally for Today Times Live since 2020 and specialize in political news. My career began when I was just 17; I had already developed a knack for research and an eye for detail which made me stand out from my peers.
