The global automotive industry is suffering from a shortage of semiconductors and chips. There is a lack of new cars in car dealerships. Those who wanted to buy a new car continue to drive the old used one. Or even choose a multi-year car with low mileage. As a result, the number of cars with mileage in the European market is declining and the price is rising. This is how one of the classic laws of a market economy works: when a product is in short supply and the demand for it is high. How will this affect the Ukrainian car market and what to expect in 2022?
In Europe — a record rise in prices for used cars
In November, a record increase in used cars was recorded in Germany. Especially — cars under 3 years old and mileage up to 20 thousand kilometers. According to the German DAT Group, gasoline cars of this age category (+ 59.3%) grew the most in price. Diesels are lagging behind, but their prices have increased by 56.2%. Both figures are a record for the German market for the last 30 years. The reason is that buyers increasingly prefer used cars with low mileage, because they can be bought "today — for today", rather than waiting a few months, as in the case of new ones. Increased demand provokes a rise in prices. This situation is very unusual for the German car market, say experts from the Institute of Car Market Research.
In Poland, despite the rise in prices, the number of used car sales increased. In particular, according to IBRM SAMAR, from January to November, 869 thousand cars with mileage were imported from abroad. This is 12.1% more than in the same period of 2020.
According to the Eastern European network of sites for the sale of used cars AAA Auto, in November 2021 in Poland published more than 200 thousand ads for the sale of cars with mileage. This is 22 thousand less than in October. Deficit in the market provokes rising prices. The average cost of a used car in Poland in November was at a record high: 22.5 thousand zlotys ($ 5,515). This is 18% more than a year ago.
However, as it turned out, this does not prevent successful trading and earning: in October, the network of AAA Auto sold more than 8,000 cars in the Czech Republic, Poland and Slovakia. This figure was a record for more than 30 years of the brand. It is the shortage of cars that motivates people to buy cars with mileage, often turning a blind eye to their condition.
The situation is similar in the Netherlands. As the Institute of Automotive Research recently wrote, 2021 was a record year in the import of used cars. Those cars that would normally sell for export to Ukraine remain in Europe. Demand for cars with mileage in the European Union is growing, despite rising prices. According to experts, in 2022 the trend will continue.
Cars in Ukraine will become more expensive, but later
In Ukraine, the secondary market predominates: 90% — used cars. Ukrainians love cars with mileage, brought from abroad. Of the total number of used cars purchased in November, more than 40% were "freshly imported". However, according to experts from the Car Research Institute, there has been no sharp rise in prices among the most popular used cars from abroad in Ukraine.
Fluctuations in prices for the most popular used cars from the European Union during June-November 2021 were within the "normal" state of the market, without abnormal growth or decline. Unlike the car markets of the European Union, prices on the Ukrainian market have not yet increased. There are several reasons for this, says AUTO.RIA analyst Ostap Novitsky.
- 60% of the market is cars worth up to 10 thousand dollars. Cars under the age of three, which have become significantly more expensive in the European Union due to the unavailability of new ones, are not in great demand in Ukraine. The average age of imported cars is 13 years. Cars of this age are popular mainly in Eastern European countries — in particular, Poland and Slovakia.
- About 20% of imported cars with mileage are cars from America. In this segment, price growth is less noticeable. Accordingly, these cars "balance" the price picture.
- In recent months, many former so-called "Europlates" have entered the market, the grace period of which has recently expired. They often hit the market below average.
- Ukraine still has a stock of "freshly imported" cars. They sell them at the old prices, because buyers are not yet ready to pay more for them. Only cars brought "to order" are sold more expensively. In other cases, the business has to adapt. For example, to buy cheaper cars, in worse technical condition or with higher mileage. After all, in order to sell a car and make money, you need to sell it at the market price.
Thus, according to experts of the Institute of Research of the car market, prices for used cars will increase by 15-20% gradually during the first half of 2022. The increase in prices will be proportional to the rise in price of these models in the European Union: from 10-20% for budget models, up to 50% for scarce abroad cars with low mileage, up to three years.
The car business needs to adapt
As is often the case, in times of crisis, one segment of a business may have opportunities to grow in another. The winners are those who are able to feel these changes and adapt, using the situation for development. Such an opportunity is now a chance to develop sales of cars with mileage. After all, the demand for them has never been so high, and the competition between new and used cars has not been so great. Of course, this will not always be the case.
For example, temporary restrictions on entry into Europe in the spring of 2020 have changed all the logistics of delivering used cars from the EU to Ukraine, says Julia Rykovska, director of WEST AUTO HUB. Individual "fit" of cars was replaced by "wholesale" delivery by large trucks. Borders were later opened, but many participants in this business decided to continue to use this type of delivery. It turned out to be more convenient and often cheaper. "If it werenʼt for the pandemic, the transition process could take much longer ," she said.
Another change is a significant increase in the use of online technologies. Buying cars online, using car auctions, ordering services on a smartphone are commonplace today. "The next step in the development of the Ukrainian car market will be the formation of even more brands. Those who can unite and create a brand win. "It will be harder for" singles "in the car business," says Stanislav Buchatsky, head of the Institute for Car Research.
Experts from the Institute of Car Research believe that in times of pandemic and shortage of used cars, the winner will be the one who will be able to buy this car at all. Preferably at a good price. And that often means buying in bulk, not one car. And here the already formed history of cooperation with foreign dealers can come to the fore. Simply tracking ads on the Internet will not be enough.
Interest in online auctions will grow. Cars after leasing will become more popular. Additionally, the automotive business will look for other ways to reduce the cost of processes. Automation with the help of specialized CRM-systems will help here.
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