The coronavirus epidemic and the war in Ukraine have made changing a car a difficult task with many unknowns and pitfalls – as of today, those who choose to buy a new car can get into it after more than a year.
Those looking for a second-hand car will pay almost 50% more than two years ago if they are lucky enough to find one.
According to data from car importers in Europe, the period from ordering to delivery of a new car varies from 6 months to a year and a half, depending on the make and model. The more security and convenience systems there are in the car, the longer the term. There are two reasons for the delay:
The ongoing chip shortages that have emerged in the wake of the COVID-19 outbreak. In modern cars, there are hundreds of them, used by all major systems – from engine control to multimedia systems. Disrupted supply chains for a wide range of components. The reason for them is the war in Ukraine. In Ukraine, 22 companies produced various parts for the automotive industry – cables, electronics, seats, etc. With the first blows of Russia, a feverish relocation of production began – mainly in Africa, but also in some European countries. However, the capacities built “on fire” still cannot provide the capacity that the plants in Ukraine provided.
The new cars: you take what’s available or you wait
As a result of delayed deliveries, the demand for new cars in the European market is currently driven not so much by buyer preferences, but by availability. This also leads to shifts among the market leaders, because the companies offering the fastest delivery win.
According to traffic police data, in the first eight months of the year in Europe, brand new cars and light trucks (categories M1 and N1) were 3.26% more than in the same period last year. For cars up to 5 years old, the growth is 1.78%.
At the same time, the prices of new cars also jumped, not as much as used cars, but still noticeably. There are several reasons – the overdemand, the increased prices of many components due to inflation, the increase in the prices of energy carriers, the higher prices of raw materials, and the increase in the cost of transport and logistics. Naturally, car prices have and will continue to reflect these changes, and expectations are that they will continue to rise steadily. In this situation, ordering a new car now is not entirely devoid of logic, especially if the need for a new car is not urgent.
Now is not the time for a second-hand car
When it comes to used cars, now is the worst possible time to buy, market experts say. “Those interested in buying a second-hand car are now choosing from the most limited and at the same time the most expensive offers on the used car market”, this is how Matas Bouzelis, automotive expert and Head of Communications, describes the situation across Europe. at auto data company carVertical.
This also applies to Eastern Europe – here, on the one hand, cars are expensive, and on the other – the supply is very limited. For example, a 7-8-year-old mass middle-class car that cost EUR 5,000 is now being sold for EUR 7,500.
As a result, the number of cars under 10 years of age purchased for the eight months of the year was 20,085, or 6.5% less than in the January-August period last year. For the most preferred – those over 10 years old, the drop is almost 11%, and their number is 103,767.
According to the deputy chairman of the Association of Car Importers, Lyubomir Dorosiev, there is a demand for cars, but the supply is problematic. “There is no supply abroad. On the domestic market, they sell them expensively. For those intended for foreign markets, 5-6 people fight and the prices are high,” adds Dorosiev.
He illustrates the situation with an example – “in my car dealership, I sell a Hyundai ix35 for 10,000 EUR. For a similar one abroad, they ask me for 11,000 euros, that is, I am 750 EUR behind on the purchase, but I still need at least 1,000 leva profit to have”. We expect bankruptcies of car dealerships, personally saying that last month he subsidized his car business with money from other businesses with about EUR 3,000.
Asked which cars are most in demand, the dealer replies, “All of them, as long as they’re available.” The tendency in larger cities to look for more expensive cars, at prices from BGN 5,000 to BGN 25,000, is maintained, while in small towns the cheapest possible ones are bought. As a new trend, the demand for hybrids is increased.
What are the expectations?
Predictions of how the new and used car markets will develop at the moment are difficult, and the situation does not look promising at all.
According to the analyst unit S&P Global Mobility, the war in Ukraine will reduce the world’s production of cars by at least 2.6 million units this year and next. The company predicts that the most affected will be manufacturers in Europe, who will probably sell 1.7 million fewer cars than if the war in Ukraine had not happened. This number also includes almost 1 million cars that were usually bought in Russia and Ukraine.
The German Center for Automotive Industry Research (CAR) focuses on sales and expects them to shrink by more than 5% worldwide. Global sales this year are likely to be 67.6 million, down from 71.3 million in 2021. This would effectively mean they are even lower than the pandemic 2020 of 68.6 million or hit a ten-year low. In 2019, 79.9 million new passenger cars were sold worldwide. The best performance to date was 84.4 million in 2017.
As for used cars, according to most analyses, the current boom in used vehicle prices peaked in the middle of this year and is set to hold at those levels. As new car deliveries normalize, the supply of used cars is expected to jump dramatically, which will drop prices immediately by around 20-30%. The only unknown at the moment is when that will happen, with good news probably a year from now.
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