Covid drives up demand for cars, leads to long waitlists, soaring prices

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Like many car buyers in Australia, Andrew Scott has been left frustrated by the effects of the COVID-19 pandemic on the automotive industry.

In November last year, he placed an order for a new Kia Sorento and was told by the dealership that it would be delivered in three months’ time.

But eight months later, his car is yet to arrive.

“I think my biggest frustration has been the general lack of communication,” Mr Scott said.

“They [the dealership] haven’t given any details in terms of the specifics of the delay.”

A surge in demand for new cars during the pandemic coupled with global production shortages is causing increased wait times for buyers.

And as demand for new vehicles outstrips supply, used car prices have also soared, with experts warning buyers may have to wait until next year for a return to normality.

Production issues and increased prices

Despite stock shortages, the demand for new and used cars remains strong.

Figures have shown more than 100,000 new vehicles were sold in Australia in May 2021 — an increase of 68 per cent compared to the same month last year.

Experts believe the trend is being pushed by more people opting to drive instead of catching public transport during the pandemic.

More Australians are also embarking on road trips due to international travel restrictions.

But global production delays are affecting supplies of new vehicles, with car manufacturers struggling to meet the demand due to a shortage of semiconductors – the microchips used in most modern cars.

Semiconductors are needed for features like infotainment and safety systems.

“This is a global problem,” said James Voortman, chief executive of the Australian Automotive Dealers Association (AADA).

“It’s affecting almost every brand in every market in the world.”

Used cars attract high prices

Limits on new car supplies are also pushing up prices for second-hand vehicles, with data compiled by Moody’s Analytics suggesting wholesale used car prices are 37 per cent above the pre-pandemic high set in February last year.

“Some people looking to buy new cars haven’t been able to get hold of them, so they are holding on to their existing car for a little bit longer,” motoring expert Toby Hagon told ABC Radio Sydney.

“The imbalance between supply and demand in the new car market is flowing through to higher prices in the used car market as well.

“In some instances, the cars are selling for more than they sold for brand new.”

Mr Hagon said classic cars and four-wheel drives are among the vehicles attracting higher prices.

“For example, V8-powered Australian muscle cars are fetching some crazy prices at the moment,” he said.

“Some four-wheel drives like Toyota Landcruisers have gone up a fair bit as well, because suddenly people are looking to go exploring around Australia.”

Dealers are cashing in on the demand, as well as private sellers hoping to make a profit.

The Australian Automotive Dealers Association (AADA) said dealerships have experienced a welcome boost in sales since the pandemic began.

“Dealers went into this pandemic experiencing almost three years of negative car sales,” said AADA chief executive James Voortman.

“We have seen increased demand and we have seen dealers making more sales.”

As manufacturers ramp up production, it’s hoped car prices will drop in the coming months.

“The carmakers are working to increase the supply of new vehicles, which then flows through the entire market to eventually alleviate some of those price pressures,” Mr Hagon said.

“If you’re not in a hurry, try and postpone the purchase for a few months, if not until 2022 because that’s when we’re expecting things to ease up a little bit.”

(Original ABC Article)