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In recent years, the used vehicle market has been confronted with particular problems, since the supply crisis with semiconductors has severely affected the purchasing chain and, of course, Corona has also been a major problem. Many manufacturers believed that the problems had peaked and that 2022 could be used to get back to pre-crisis levels. However, those plans were thwarted by Russia's invasion of Ukraine, leaving the auto industry facing an even bigger crisis that will be much more difficult to resolve. Matas Buzelis, automotive industry expert and head of communications at vehicle data company carVertical, provides insights into the current situation.
destroyed supply chains
The expert points out that while Russia's automotive market is not the largest, it plays a significant role in automotive industry supply chains. For example, titanium, iron and palladium come to Germany from Russia. Furthermore, with 108 million tons of iron ore produced in 2021, Russia is the fifth largest iron ore producer in the world. It supplies European steelmakers who are now faced with higher prices and potential difficulties in sourcing metal from other countries. And Russia's invasion has also had an impact on the automotive industry in Ukraine. For example, German automobile manufacturers such as BMW and Volkswagen use cable harnesses from a large Ukrainian supplier. Furthermore, Ukraine is the third largest producer of nickel and aluminum, two extremely valuable resources needed in battery and EV components. Finally, Ukraine produces nearly 70% of the world's neon gas needs for components like microchips, which are already in short supply.
It's getting harder to find a good used vehicle!
Buying a used vehicle was already difficult and expensive in 2021, and it looks set to become even more difficult in 2022. As the used vehicle market continues to grow, the relevant dealers are faced with a shortage of vehicles. One of the main reasons for the current situation is the crisis in the new car market. Manufacturers are beginning to cut vehicle production more and more to keep production low but stable. And the change in vehicle construction is slowing down the flow of vehicles into the used car market. Prospects put off selling their cars or don't sell them at all."Those interested in buying a used vehicle are now choosing from extremely limited and expensive offers in the used car market. However, the limited supply of used vehicles does not mean that buyers should miss out on fraud protection options. On the contrary, prospective buyers should check the history of the used vehicle as the choice is limited." – says Buzelis. As carVertical's Head of Communications goes on to explain, used car dealers are currently buying pretty much anything they can get their hands on with little regard for condition. The risk of receiving a used vehicle in poor condition can therefore be significantly higher than it was a year or two ago.
Unpredictable used car prices!
By 2021, used vehicle prices had already reached all-time highs. Although they stabilized and even fell towards the end of the year, the Russian invasion of Ukraine has created an unprecedented situation in the Eastern European used car market. For years, buyers of used vehicles have been flocking from Ukraine to Poland, Lithuania, Slovakia and Hungary. While newer vehicles were in greater demand in countries' domestic markets, Ukrainians bought many cars more than a decade old, especially those with fuel-efficient and perceived "dirty" diesel engines. On the other hand, the reduced flow of customers will also change the used vehicle market in the neighboring countries of Ukraine. Older motor vehicle prices will most likely fall as dealers try to cut losses to adjust to the current situation.
The influence of fuel prices!
Fuel prices have exceeded the critical €2 per liter mark in many European countries, sparking interest in changing daily habits. "Rising fuel prices will result in fewer people commuting. They will reduce their annual mileage in part by using public or other alternative modes of transport. And less mileage also means fewer accidents, resulting in savings in running costs“, – says the carVertical expert. This situation will reduce the overall number of vehicles on the roads. And higher fuel prices are also increasing interest in more efficient vehicles. This means vehicles with diesel engines could attract interest due to unbeatable fuel economy, especially on the Autobahn. However, this trend will only be limited to countries in which fuel is not taxed with high CO₂ emissions. Increased fuel prices will likely encourage people to buy used ones electric vehicles to invest. Despite rising energy prices, the operating costs of electric vehicles are currently lower and can be reduced even further if, for example Solar energy used for loading. It is estimated that charging with solar power saves 600-800 Euro per year.
Of course, that wasn't the end of it!
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