With the increased availability of cars and trucks, the pressure that caused the price spike has eased. Since 2019, the average price paid in the EU for a used vehicle has increased by 39% – from €13,560 to €18,900. According to economists, used vehicle prices have been rising in 2023, but at a slower pace. 2024 started with a decline in used car prices. The AUTO Group Price Index1, which shows the monthly evolution of used car prices across Europe, showed a price drop of 3.3%. In January 2024, wholesale prices for second-hand cars decreased by 4.9% compared to December 2023. Unfortunately, they still remain 24.8% higher than before the COVID-19 pandemic.
Why have prices slowed down?
The prices of steel, copper, aluminum, and nickel are estimated to account for about 10 percent of a car’s production costs. The economic slowdown in China, the world’s largest consumer of industrial metals, has caused a drastic drop in demand for these raw materials, affecting their prices on world markets. Compared to the May 2021 peak cSteel prices fell by 30 percent, while aluminum prices fell by 18 percent. – compared to the May 2022 peak. The obstacles to semiconductor supply that had limited production and artificially inflated car prices have also disappeared. Until 2021 nSome dealers had no new cars in stock at all. Many frustrated buyers have turned to the used car market. The resulting surge in demand for used cars has also driven up prices, driving many people out of the car market altogether. Falling global commodity prices and a lack of disruptions in the global supply chain have boosted car production and taken pressure off prices for both new and used cars. “Prices have been trending down for about six months as automakers (worldwide) ease up on deals to keep sales flowing,” said Erin Keating, analyst In Cox Automotive. In other words, car prices are falling as more cars are on dealer lots. Increased vehicle production and relatively low buyer demand are the main factors driving the price changes.
More production
According to the European Automobile Manufacturers Association, the number of cars manufactured in the EU has been growing for two years. Before the outbreak of the pandemic, in 2018, 14.6 million cars were produced in Europe, in 2019 production decreased by 3.7%, reaching 14.09 million units at the end of the year. In 2020, there was a collapse in production, as a result of which European factories produced only 10.8 million cars (-23.5% compared to 2019). In 2021, production continued to decline, and the number of cars manufactured in Europe amounted to 10 million units (-6.7% compared to 2020). During this time, the prices of used cars systematically increased, because new ones were simply not available or were very difficult to obtain. Production rebounded (+8.3%) only in 2021. At the end of the year, the number of cars manufactured in Europe amounted to 10.3 million units. In the first three quarters of 2023, more than 9 million cars were produced, up 14% compared to the same period in 2022 (data for the full year 2023 is still missing).
Production has also increased overseas. Recall that due to pandemic-related shutdowns, North American car production at the end of 2020 was 13.72 million units. Before the pandemic, the American automotive industry produced about 16-17 million vehicles per year (according to data from the Department of Energy, which tracks the number of cars produced by year and type). Currently, new car inventories in the United States are still below the 4 million level – the pre-pandemic level – but many analysts and dealers say that rising production indicates that 2024 will be the most affordable year for buyers in the last five years. Global car production is expected to create a surplus of 5 million vehicles, which will continue to lower prices.