Last year was a year we all would like to forget. Unsurprisingly Car sales across Australia dipped by almost 15% in 2020. Australian consumers purchased 916,968 vehicles in 2020 down on the 1,062,867 cars bought in 2019, signalling the weakest year in car sales in 20 years.
2020 was not all doom and gloom for car dealerships. The COVID-19 pandemic has been good news for Australia's used car industry with car prices jumping by 35% cent on 2019 prices.
Lockdowns, working from home arrangements and government advice to shun public transport are three of the main reasons for such a rapid rise in price and demand for used cars.
Economic changes also had a major impact on the demand of used cars. With border closures, limited international trade and decreased production with factory closures, new car supplies have been greatly affected in the last 12 months.
For dealers, adapting to market conditions can make or break your dealership. Many dealers reacted quickly to the situation and implemented new strategies based on consumer demand.
With such a massive rise in demand for used cars, dealerships are experiencing issues coping with stock inventory. Many dealerships are experiencing low to no stock due to limited cars available on the market. The key challenge for dealers going into 2021 is finding good quality stock at an affordable price that can turn a profit.
2021 Market Insight
Going into 2021 some of the major frustrations that were experienced in 2020 are expected to continue for at least the first quarter.
Car dealerships around the country are expected to find it difficult to source affordable and high-quality stock for some time. As Australia returns to some form of normality majority of the world are experiencing a massive second wave. This heavily impacts global supply chains, logistics and getting new stock to our shores. The Australian Automotive Dealer Association has indicated that it is unclear when the issue will be resolved but have pointed that it could be until at least June 2021.
In some welcoming news for car dealerships Moody analytics has said demand across the used-car sector is now thought to have peaked with prices likely to fall in the first half of 2021. Moody analytics also stated that they are unsure how sharp prices would fall due to the market experiencing such an instant rise. This news is so beneficial for dealers as cheaper prices will open the door for increased stock availability and higher profit margins once a car is sold.
It is so important to have a clear plan outlined for your dealership in 2021. If you fail to plan, you plan to fail. Scalability and adaptability are key for dealers going into 2021 to stay competitive. Last year proved that things could change overnight and there is no reason not to believe it could happen again. Good quality stock at a low price is key for dealers going into 2021. Dealers must understand their intended target market and what type of cars they are looking for.
Recently FCAI released the most popular cars in Australia throughout 2020. The main finding of the report showed that much of the same vehicle models in the 2019 list carried over onto the 2020 list. This data is so helpful for car dealerships who are looking at sourcing popular used car models that often sell quick.
Top 10 selling cars in Australia in 2020
- Toyota Hilux
- Ford Ranger
- Toyota RAV4
- Toyota Corolla
- Mazda CX-5
- Hyundai i30
- Mitsubishi Triton
- Toyota Prado
- Kia Cerato
- Hyundai Tucson
To conclude, the automotive industry looks to be slowly transitioning out of the challenges of COVID-19. Dealerships are expected to struggle with stock for at least the first quarter of 2021 before slowly returning to normality.
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