DoneDeal Q3 Car Price Index: Annual Inflation Drops to 10.5%, Lowest Rate Since Pandemic
Annual Inflation Drops to 10.5%, Lowest Rate Since Pandemic
As we approach the end of 2023, it is clear that the pandemic/Brexit driven price inflation experienced in the used car market in Ireland is starting to subdue. The imbalance between supply and demand over the past few years appears to be turning a corner to a more moderate equilibrium. Having said that, there is still a way to go, in terms of supply, before price inflation returns to pre-pandemic levels.
The nature of the business cycle in the Irish motor industry, means that demand tends to peak just after the start of the year and the midpoint of the year. This is due to the bi-annual plate change. This year was no exception, price inflation increased to 3.3% in Q3, up from a post-pandemic low of 0.9% in Q2. Despite a moderate jump in prices in Q3, the annual rate of price inflation is now at its lowest level since the start of the pandemic: 10.5% vs Q3 2022.
Analysis of ad view trends on DoneDeal helps illuminate consumer demand over the past two years. In Q2, demand fell by 9.7% compared to Q1, which resulted in the lowest rate of quarterly price inflation (0.9%) since the start of the pandemic. In July, consumer demand spiked, which is typical just after the plate change. In Q3, demand was up 2.4%, which helps to explain the recent increase in used car prices.
Supply on DoneDeal has become healthier in the past year, and has been growing by an average of 5.4% in the past three quarters. However, Brexit restrictions continue to affect the lower end of the market more so than the upper end of the market. In Q3, price inflation in the lower end of the market(<€7k) was 4.3%, compared to just 1.6% in the upper end (>€21K).
In terms of annual inflation, however, both the lower and higher priced cars have dropped to their lowest levels since the beginning of the pandemic: 18.1% and 6.3%, respectively.
Supply recovery and the subsequent price inflation slowdown in the upper end of the market can be explained by looking at SIMI’s monthly motor stats updates. The flow of new cars (both imports and new registrations) into Ireland in Q3 is up 12.6% year-on-year. In Q3, there were 40,870 new cars registered in Ireland, compared to 36,288 in the same three month period last year. Motor production in 2023 has started to overcome supply chain issues which means shorter wait times for new models.
Total used car imports are roughly the same as last year. In Q3 of 2022, there were 13,308 used cars imported into Ireland, compared to 13,313 in Q3 of this year. The share of used cars being imported from the UK continues to drop to lower levels. In Q3 just 26.7% of imported used cars were from the UK, this compares to over 95% in Q3 of 2018. Importing used cars is a key part of the solution to improve affordability in the used car market. Continued pressure on the supply of lower priced cars has acute negative effects on affordability, meaning people hold on to lower older cars for longer, hence safety and emissions standards suffer.
Good news from an emissions perspective is that the share of EV and hybrid vehicle registrations continues to grow at unprecedented rates. In Q3 7,408 new EVs were registered in Ireland, representing a 22.1% increase compared to the same period last year (SIMI). EVs and hybrids now account for just under half of new cars registered in Ireland, compared to just 22% in 2020.
The recent boost in new EV sales in the Irish car market is starting to trickle in to the used car market and EVs in Q3 account for 2.3% of the stock of used cars on DoneDeal, this is up from just 0.9% in the same time period last year (over 1,800 compared to just over 600 last year). The relative supply boost of EVs into the market can go towards explaining the acute price deflation. Prices of used EVs are down 2.6% in the past quarter and 7.1% in the past year. In contrast, hybrid cars are still experiencing positive price growth: 1.1% Q/Q and 6.5% Y/Y.
Average price of New EV falls to below €50,000 - Analysis by Aidan Doyle
Motor industry consultant Aidan Doyle, analysed the evolving pricing landscape of new electric vehicles (EVs) comparing the 231 registrations from January-May to the 232 registrations from July - August 2023. The top 40 models registered in July and August were analysed by both model and trim level (SIMI data).
This analysis found that the average price of a new EV has reduced from €53,250 for 231 registrations within the data set to €49,900 for 232 registrations.
What is particularly noteworthy, is the significant shift in price brackets. In the 232 model set, 31% of the vehicles were priced under €40,000, a substantial rise from the 15% observed in the 231 set. The MG4 emerges as a primary catalyst in this shift, increasing the proportion of vehicles priced below €40,000. The BYD Atto, while marginally surpassing the €40,000 mark, has also played a role. The sole representative priced under €30,000 within the top 40 models sold is the VW e-up, securing the 21st position.
It's evident that as more affordable models enter the market, prices will likely decrease. However, a significant factor contributing to the consistently high average price of new EVs is the preference of Irish consumers. They tend to seek the same body style and size of vehicle when transitioning from ICE to EV. This trend is evident in the medium SUV segment, which makes up 31% of the overall market and 38% of the EV market. The popularity of SUV/CUV models like the Volkswagen ID.4, Skoda Enyaq, Hyundai Ioniq 5, and Kia EV 6 underscores this point.
DoneDeal is the largest car website in Ireland, listing 9 out of 10 cars advertised online from car dealerships. Economist Tom Gillespie analysed over 5m of DoneDeal’s vehicle listings from 2011-2023 using hedonic regression analysis to isolate pricing inflation associated with vehicles after controlling for mileage, age, and other vehicle attributes.