2024 A BUYERS’ MARKET
James Ehmann - Director, One SMG
As we officially exit what has arguably been one of the most challenging periods in Australian automotive sector history, for the industry as well as consumers, I’d like to offer some thoughts on what 2024 might bring for those in the market for a new or used car.
We are now starting to see a significant easing of the largely COVID-induced supply issues to the extent that it won’t be long before the days of longs waits on new cars are truly a thing of the past. In markets like the US, there is even concern that there will be an oversupply of new vehicles that will result in an excess of up to 5 million vehicles that will in turn push prices down (UBS, 2023.)
Whilst new car sales are at an all-time high, it's not certain whether we’ll see a sustained upward growth trajectory in Australia as manufacturers and dealers are all too aware of the cost-of-living pressures that our households are facing and the effect this is going to continue to have on car sales. Incentives on EV’s are pushing more customers in that direction for new cars, but the incentives appear to be having a negative impact on the used EV market, which will continue to grow. What we do know is that the recovery of the new vehicle market will see prices of used cars continue to drop and by the first quarter of 2024, I expect that used car buyers will be seeing real value across the board. This is good news for those in the market for either a new or used car in 2024.
Supply issues have put a huge amount of strain on the transport space across the board and have caused issues with sharing platforms, rental car companies and subscription car programs alike.
Despite these challenges, there is no doubt that the transport sector is changing around the world but there remains a large number of people who simply cannot go without a car and who cannot entertain working from home, car-share pools, or modes of alternative transport due to a vast number of reasons. It might be the nature of the job they do, that they live with a disability or any number of other reasons. For these people, the ability to purchase and maintain a vehicle will come with its challenges in these times of rising interest rates.
I cannot agree more with Deloitte’s Global Automotive Consumer Study (2023) which concluded that consumers, when asked who they trust most, pointed to their relationship with a selling, servicing dealer or mechanic. We are in an era where some Gen Z’s are happy to buy electric vehicles online, having never test-driven the car or been at the receiving end of a dealership floor sales pitch, but the vast majority of Australians place great trust in their local dealerships particularly in regional areas, where dealerships are both major employers and supporters in and of the local community. People want to walk into a dealership and touch and feel the merchandise – the same dealership that might sponsor their son or daughter’s footy team. With family finances under pressure across Australia, I only see this trend growing given that there is a demand for increased financial security in most Australian homes these days and that post COVID, many people are seeking that in-person experience.
The shift to electric vehicles will gain significant momentum in 2024 and already accounts for nearly 10% of new vehicle market share. Backed by federal and state-based incentives, I believe that many people looking to buy a new car in 2024 will strongly consider an EV, despite the early stage of the charging station rollout. By mid-2024, new EV sales will not just reflect society’s early adopters but will be far more ‘the norm’, although I expect this will remaining centralised to metro areas. There are some exciting EV brands and models coming to Australia this year and I suspect interest and uptake will be significant. I also expect that older Australians will want to switch to electric vehicles because of the ease of charging at home and this could see the used car market buoyed by fresh stock of quality, low mileage vehicles, further driving used car values down.
Another corner of the industry reaching a tipping point is connected vehicle technology. More and more vehicles are being manufactured with built-in technology that allows vehicles to be ‘connected’ to each other and to roadside infrastructure. This ultimately enables cars to ‘understand’ their position and heading in relation to other road users, whether a traffic light is red or green and even whether a fellow road user is about to cause an accident by skipping a red light. Enhanced road safety is the ultimate goal but manufacturers will also be able to use increased driver data to help shape product development and user experience; For some, a scary proposition.
My advice to people looking to buy a new car in 2024 is:
1) Speak to your local dealer now. There are lots of great new cars coming this year and if it’s a used-car you are after, your dealer can look out for models that you like as stock frees.
2) Do your homework on EVs (full electric and hybrid). Get one if you want one and if owning one makes sense for your work and family lifestyle. At this stage of the game, an EV isn’t going to work for everyone and you should consider the maximum trip distance and frequency, charging infrastructure around your usual routes and your living arrangements (for example, your body corp. might not allow you to easily put charging infrastructure into your building).
3) Buy a car that you can truly afford. If cost of living continues to rise, you don’t want to find yourself defaulting on payments or skimping on maintenance. Enjoy your car owning and car driving experience.
4) If you don’t know already, enquire if your employer supports Novated leasing which comes with a host of budgeting benefits. Some companies don’t offer novated leasing simply because they don’t know that they can or how to go about it.
ENDS
James Ehmann is a Director of One SMG (formally Smith Motor Group) which comprises a range of vehicle and caravan dealerships, fleet management, leasing, and collision repair centres. Operating across Australia and New Zealand, One SMG represents 15 of the most popular auto brands in the country. For more visit: www.onesmg.au
