Car costs not improving anytime soon

Professor Vinh Thai, logistics and supply chain management  

Topics: car supply, new cars, used cars, supply chain management  

"Many expected the pains of buying new and second hand cars in Australia to end in 2023, however car prices continued to rise and unfortunately this is unlikely to improve anytime soon.

“There are several factors contributing to the availability and affordability of cars – and most of them come down to supply and demand issues.

“New car demand has been increasing in Australia, with a 15.4% increase in sales in 2023 compared to 2022, and many factories are still playing catch-up from delays caused by the pandemic.

“But there are other factors at play today which are also contributing to delays in manufacturing, shipping and sales of new cars. 

“A global shortage of semiconductors is causing a delay in car manufacturing. These electronic chips provide power for battery management, in-car entertainment, driver assistance systems, mapping applications and advanced driver warning systems and are an essential part in most new cars.  

“A high demand on sparse Roll On-Roll Off carriers and the re-routing of car carriers due to the Houthi attacks in the Red Sea are causing delays in the shipping process. As Australia does not manufacture cars domestically, we fully rely on shipping transport for stock.

“On arrival at Australian ports there’s the issue of port congestion caused by a backlog from the pandemic, increasing demand for quarantine checks, shortage of labour and industrial disputes.

“These issues we face with getting new cars to Australia have increased the demand for second hand cars – leading to a supply-demand imbalance.

“Some customers are aggravating this by putting their name down for another car as they pick up their new car. They may also harness this demand and resell their used car for more than it is worth, potentially driving people in need of a car to opt for a new car instead, again, adding to the vicious demand cycle.

“When the supply eventually catches up with the demand, we will hopefully see the the issue ease. But this is unlikely to happen in 2024.  

“In the meantime, the Government may need to step in to deter unethical buying behaviours.”

Professor Vinh Thai is professor of logistics and supply chain management and founder of the Australian Maritime Logistics Research Network (AMLRN).

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