The Island of the Blessed: An Analysis of the Used Car Market

The Island of the Blessed: An Analysis of the Used Car Market

The Covid-19 pandemic has hit the automotive industry hard: market collapses, delivery problems due to severed supply chains and reduced raw material production. In addition to the cruel health catastrophes across the globe, the economic consequences cannot yet be foreseen. But there is also light at the end of the tunnel: the used car market. If you look at the GW trade with a magnifying glass, you can see interesting and lucrative trends. 

Used cars are winners

The new car year 2020 was a painful one: only 248,740 new car registrations in Austria. A decrease of 24.5 percent compared to the previous year. However, if you look at the used car re-registrations (841,196 re-registrations in 2020), the decrease here is only 3.4 percent compared to 2019. So the GW trade had a mini-dip and at a very high level. The peak year of 2018 with 874,827 re-registrations was not that far away. These figures support exactly the statements that we have also heard from the front in the past 14 months: End customers are hesitant about new cars, but used cars are doing well unabated. This is also proven by one current study by willhaben.at. 

Stable trend

Well, you might think that customers saved money during the Corona crisis, postponed buying a new car and therefore fueled the GW market somewhat. No, the GW trend is much more sustainable. According to surveys by Eurotax and Statistics Austria, there was a record number of car re-registrations in the first quarter of 2021: a whopping 214,133 were recorded. For comparison: Q1 2017 – the previous record quarter with 209,355 re-registrations – was noticeably surpassed. But that alone could just be a snapshot. What is exciting is that both the used car supply and the days on offer have decreased. While the average downtime was 110-115 days in April and May 2020, this fell to around 85 days in December and now again in Q1 2021. A dramatic improvement for the used car trade - after all, every day costs money. 
In addition, there is a constantly growing vehicle inventory. While there were 4.36 million cars in 2010, there were already 5.02 million in 2020. This is sustainable, solid growth. The motorization rate also rose: from 530 vehicles per 1,000 inhabitants in Austria in 2010 to 570 in 2020. This is also a strong signal for the workshops: the current vehicle inventory secures the business for at least the next ten years. In addition to the sheer number of vehicles, the age of the vehicles is also continually increasing. While in 2005 the average age of private individuals was 7.9 years, by 2020 it had increased to 9.7 years - almost two years older. Also good news for independent workshops and parts dealers, because as we know in the industry, such old vehicles no longer see the authorized workshop very often. Even the commercially used car models got older, albeit only from 3.4 to 3.7 years. 

How potent are the alternatives? 

Alternative drives are currently very popular, and not just in the media: in 2020, electric and hybrid models already accounted for 11.3 percent of new registrations. In the first quarter of 2021 it was 18.8 percent - almost one in five new cars. A trend that will sooner or later spill over into the GW market. Although this is more of a forecast for the future, because in the used car registrations in 2020 and in Q1 2021, diesel is still consistently at the top with almost 60 percent. The share of gasoline declined slightly from 2013 to 2021 (from just under 41 to less than 37 percent). This means that the alternative drives on the GW market practically only reduce the gasoline share, but leave the diesel engines untouched. However, it must be said that the hybrid models are almost all petrol engines. 

Residual values ​​with surprises

With the start of the pandemic, the asking prices fell slightly. Since May 2020, the market has been developing positively again and has already completely recovered. Prices for light commercial vehicles have risen particularly sharply. The price development is exciting for particularly young vehicles (0 to 6 months) and older and old vehicles (54-90 months and more), which by far have seen the strongest increases. The offer prices for alternative drives are definitely under pressure: the battery-electric models (BEV) have lost the most, hybrid models also fell and are still in the red compared to the start of the pandemic. Diesel and gasoline, on the other hand, actually increased. If you look at the residual values ​​by fuel type (petrol, diesel, electric and hybrid) and vehicle age (12/24/36 and 48 months), a clear picture emerges: diesel vehicles suffer the greatest losses among young used vehicles. From 24 months onwards, the electric models drop off dramatically and even bring up the rear in the age group at 48 months. Gasoline engines are the most stable, still producing 52.3 percent even after 48 months, while BEVs only achieve 44.4 percent. In terms of vehicle segments, the residual value emperors are city cars, followed by small and medium-sized SUVs. The middle class brings up the rear from vehicle ages of 24 months. 

Conclusion

The GW market still offers good business for local traders. Robert Madas, Regional Head of Valuations at Eurotax: "Compared to the new car market, the used car market is stable. In the short and medium term we expect stable or slightly increasing demand while supply remains tight. Due to Covid, new cars are less available on the market and there are fewer short-term registrations. We are seeing increased demand for smaller vehicles due to the trend towards individual mobility." When it comes to residual values, Madas is clear: "Older electric and hybrid models are under great pressure due to aging technology. However, very young models show high, stable residual values. We expect a positive residual value development for gasoline engines. However, there will be an oversupply for diesel engines in the long term, as the new car trends only appear on the GW market with a delay."