The Australian automotive market is witnessing significant shifts in supply chain dynamics in 2024. As the market leader flexes its production muscles, the influx of new brands is taking new car sales to record levels.
The Supply Chain and New Vehicle Dynamics
In 2023, Australia experienced a record-breaking year for new car sales, driven largely by demand from the post-COVID years. With supply chains disrupted, many vehicles ordered in 2022 have arrived much later, contributing to a backlog of new cars entering the market.
This year, these dynamics are changing. Manufacturers like Toyota have ramped up production, and have added more new vehicles, including a significant number of hybrids. This influx is not just limited to traditional brands, Chinese car manufacturers are entering the market in increasing numbers, adding to the variety and volume of vehicles available to Australian consumers.
The increased supply is beginning to saturate the market, leading to a situation where manufacturers might once again resort to offering discounts to move their stock. This is a stark contrast to the recent years, where demand far outstripped supply, and discounts were a rarity. For fleet buyers, who are a significant part of the market, this increased supply means they have more bargaining power. Manufacturers and dealers, who previously prioritised retail buyers, are now more inclined to offer favourable deals to fleets to maintain sales volumes.
Impact on Used Vehicle Prices
The knock-on effect of these changes is being felt most in the used vehicle market. In 2022, used car prices reached a peak due to the shortage of new vehicles. Numerous reports show that used car prices haven’t plummeted with increased supply. Instead, they have gradually declined, reversing the steep increases seen in 2020 and 2021. This trend is expected to continue as more new cars enter the market.
Moreover, the types of vehicles now entering the market—particularly hybrids and fuel-efficient models—are more appealing to both fleets and retail buyers, further eroding the demand for less efficient used vehicles.
The Role of Chinese Brands
Chinese car manufacturers are playing a pivotal role in this shift. Brands like MG, Great Wall, and others are offering vehicles at competitive prices, often undercutting more established brands. These vehicles are not just cheaper but are also improving in quality, making them an attractive option for price-sensitive buyers. The growing presence of these brands is expected to increase price competition across the board, both in the new and used vehicle markets.
The entry of these brands is also putting pressure on traditional manufacturers to offer more value, either through price reductions or by adding more features to their vehicles. This increased competition could lead to a broader range of affordable vehicles in the market, further depressing used vehicle prices as consumers opt for newer, more feature-rich options.
The Australian automotive market in 2024 is undergoing a transformation driven by changes in supply chain dynamics and an influx of new car brands. The increased supply of new vehicles is beginning to bring back discounts, a shift from the high-demand, low-supply scenario of recent years. This change is impacting the used vehicle market, where prices are softening, as more new vehicles become available. For both large fleet buyers and small businesses, these dynamics offer new opportunities but also pose challenges, particularly for those looking to sell used vehicles. As the market continues to adjust, the trends set in 2024 will likely shape the automotive landscape for years to come.
