Prices continue to grow, with total car price inflation now at 77.5% since the start of the pandemic
Prices continue to grow in 2023, with total car price inflation now at 77.5% since the start of the pandemic.
DoneDeal’s Motor Price Index is the result of independent third Party economic analysis of DoneDeal’s data by economist Tom Gillespie.
Strong price growth so far in 2023
As we approached the end of 2022, quarterly price inflation in the used car market slowed considerably to a 3-year low of 1.4%, signalling a slow down in the acute inflationary period observed since the start of the pandemic and the onset of Brexit. This slowdown at the end of 2022 resulted from weak demand and a modest recovery in supply. Slowdown in demand at the end of the calendar year is typical in Ireland as consumers wait for the new year to take advantage of the relative price drop at the start of the calendar year.
The outlook for 2023 was therefore somewhat uncertain: was the slowdown in demand part of the normal cyclicality of demand, or was it a sign of a longer trend of reduced consumer spending?
Figures for the first three months of 2023 are in stark contrast to the previous quarter as strong consumer demand saw prices grow by 4.6% since Q4 2022. This increase in demand in Q1 means that the annual rate of inflation now stands at 13.2%, down from 26.6% in Q1 of last year. When we take the total price growth since the start of the pandemic in March 2020, prices are now 77.5% higher.
Supply & Demand on DoneDeal:
An in-depth analysis of ad view trends on DoneDeal gives an insight into consumer demand over the past two years and sheds light on the reason for the continued growth in prices. Between December 2022 and March 2023, monthly growth in demand was significant, increasing by 21% in January and 15.5% in February.
The more modest 5.3% increase in the supply of cars was likely not enough to meet demand, leading to a relatively strong price growth in Q1. The increase in prices was observed in both ends of the market, with the difference in inflation in the lower and upper ends of the market being quite similar; 6.1% and 5.1%, respectively.
Share of imported cars from the UK continues to fall:
This increase in demand has also been translated into an increase in new car registrations: In Q1 of 2023, 58,107 new cars were registered, representing an increase of 16.5% compared to the same period a year ago (SIMI).
Imports also increased by 6.4% to a total of 12,385 in Q1 (the first annual increase since 2019). The share of used cars being imported from the UK fell to a new low of 32.7%, this is in stark contrast to Q1 of 2020, when the share of all imported used cars coming from the UK was 93.6%.
Overall, used car imports to Ireland are down 53.5% in the first 3 months of 2023 when compared to the first three months of 2019.
Encouraging signs for Electric Vehicles & Hybrids:
The share of new EV registrations continues to grow in 2023. In Q1, 9,303 new EVs were registered in Ireland, representing an almost 50% increase compared to the same period last year.
EVs and hybrid cars now account for 44.6% of new cars registered in Ireland, this compares to just 18% in 2020 and 6.2% in 2018 (SIMI). The number of new EVs has grown considerably in Ireland in the past few years from just 1,233 in 2018, to 4,013 in 2020, and then 15,676 in 2022. The boost in EV registrations in the past three years is now starting to trickle into the used car market.
Q1 of 2023 saw a major boost in the stock of used EVs listed on DoneDeal (approximately 1,500 ads), almost triple the number of listings compared to any three month period in 2022. This growth in supply seems to have had a stabilising effect on prices: Q1 saw used EV prices decrease by 0.7%. The steady transition of new EVs into the used car market is an encouraging sign from an environmental policy perspective, as an increase in supply should make EVs more affordable and encourage people to transition. It is hoped that the charging infrastructure development will keep in line with the increased number of EVs on the road, especially in rural Ireland, where car emissions per person are highest.
DoneDeal is the largest car marketplace in Ireland, listing 9 out of 10 cars advertised online from car dealerships in Ireland. 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.