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Article Type: Long Read
Absolute residual values (RVs) in many European markets maintained a trend of double-digit year-on-year growth last month. Values represented as a percentage of retained list price (%RV) also rose when compared with May 2022, although this was primarily at a slower, single-digit rate.
Meanwhile, month on month, RVs were broadly stable. Italy saw the highest absolute growth at 0.8% and France felt a %RV improvement of 0.8%. Absolute RVs in Switzerland’s used-car market took the greatest fall at 1.3%. However, RV fluctuations do not tell the full story of how European used-car markets performed in May.
As indicated by the sales volume index, demand saw double-digit year-on-year drops in France (down 38.4%), Spain (down 23.6%), Italy (down 22%) and Austria (down 19.7%). While Germany, Switzerland and the UK saw demand rise, up 15.6%, 4.3% and 1.6% respectively, this was still below their respective levels of supply.
Switzerland (up 36.4%), Austria (up 19.7%), Germany (up 16.1%) and Spain (up 8.3%) saw greater supply than in May 2022. While France and Italy noted negative year-on-year results from the active market volume index, down 28.9% and 11.6% respectively, supply to their used-car markets still outstripped demand. The UK was the only country to see this trend inverted, with supply falling 12.4% year on year.
Compared to May 2022, the average number of days needed to sell a used car last month increased in Austria, France, Germany, Spain and Switzerland. This further confirms the observed trend of falling used-car demand.
Carmakers are continuing to surmount supply-chain challenges initiated at the beginning of the COVID-19 pandemic. This means the volume of young used cars entering the market will likely keep growing. However, if demand does not keep pace, RVs will face increasing pressure as more models hit the market.
The interactive monthly market dashboard examines Austria, France, Germany, Italy, Spain, Switzerland, and the UK. It includes a breakdown of key performance indicators by fuel type, including RVs, new-car list prices, selling days, sales volume and active market volume indices.
Defined by undersupply and falling demand, the current base-case scenario contains the potential for positive and negative outcomes. Should Europe’s economic situation worsen, used-car prices would experience greater pressure, with demand taking a bigger hit. Should the supply situation suddenly experience significant improvement, this would only compound the situation.
The semiconductor crisis is still sending sizeable ripples across the automotive industry. However, if this situation were to become inverted by lower demand for consumer electronics, carmakers could see a deluge of essential electronic components. This would mean a greater supply of vehicles, but without a corresponding upswing in demand, RVs would suffer.
On the other hand, if new-car supply was disrupted, the used market would benefit as more consumers explore available alternatives to factory-fresh models. Should automotive suppliers hit economic turbulence, this could also happen.
Conflicts around the world threaten stability too, with the war in Ukraine a key example. Europe’s already weakened supply chains would see additional disruption should the war escalate even further.
RV pressure increases in Austria
In May, Austria saw the continuation of a trend of rising living costs and slowing used-car transactions compared to 2022. The sales volume index confirmed demand shrank, declining 9.4% compared to the previous month and a drop of 19.7% compared to May 2022. Conversely, the supply of passenger cars aged two-to-four years was around 19% higher in May 2023 than a year earlier. But last year, supply was significantly lower than before the COVID-19 pandemic.
Average days to sell increased again to 75.7 days, confirming a slowdown in used-car demand. Hybrid-electric vehicles (HEVs) sold the fastest, averaging around 49 days, followed by diesel cars and plug-in hybrids (PHEVs) with 75 days. Battery-electric vehicles (BEVs) sold slightly slower at around 76 days, only just ahead of petrol cars with 78 days.
‘Despite weakening demand and improving supply, RVs of 36-month-old cars have remained stable compared to April,’ said Robert Madas, Eurotax (part of Autovista Group) regional head of valuations, Austria, Switzerland, and Poland. ‘The retained percentage of original list price was 54.4% on average. This marked a 4.5% year-on-year gain but shows that pressure on RVs is increasing.’
With a %RV trade value of 57.4%, HEVs are currently leading the way, followed by petrol cars (55.3%), diesel cars (54.3%) and PHEVs (53.5%). Meanwhile, 36-month-old BEVs retained the lowest value, at 49.5%. As demand is expected to weaken while supply recovers, further pressure on RVs can be expected. The RVs of three-year-old used cars will remain relatively high but with a decreasing trend.
‘The %RV is forecast to end 2023 down approximately 2.4% on December 2022,’ said Madas. ‘In 2024, %RV is expected to decrease further by around 3.5% year on year, due to weakening demand and increasing supply.’
Electric RVs to drop in France
Stability continued for France’s used-car market last month, with higher absolute RVs and marginally larger values in %RV terms. Climbing prices in the past did not influence RVs owing to the steep nature of increases. The average time to sell was slightly longer, as price continued to influence buyers. Those who did pursue a purchase were budget conscious and looked to older vehicles or a lower segment. Cars over 12 years of age suffered the least.
‘A homogeneously priced range of EVs entered the used-car market in May, which explains the lower absolute RVs and list prices compared with April,’ said Ludovic Percier, Autovista Group residual value and market analyst for France. ‘Regarding Tesla, absolute RVs will likely drop in the coming months, especially for the Model 3 and Model Y. Other manufacturers have already dropped their list prices to stay competitive, which will result in an overall decrease in their absolute RVs as well.’
Petrol and diesel RVs remained stable month on month in both absolute and percentage terms. Diesel models did see a marginal RV increase, with figures stable globally, but sales volumes experienced a drop. As new-car buyers have been switching from diesel to petrol (or other powertrains), the fuel type’s availability has been lower on the used-car market due to this drop in registrations. However, lower used-car demand for the powertrain has compensated for this.
Diesel RVs have seen little movement, even with the fuel type’s tarnished reputation and the implementation of low-emission zones (ZFEs). These zones only impact cities with 150,000 inhabitants or more and high-mileage drivers are unaffected. Diesel vehicles will be more heavily impacted from late 2024 and into 2025.
Once again, HEVs saw RV stability, with %RVs growing marginally and absolute RVs dropping because of lower list prices. PHEVs saw steady volume, but more premium and SUV models were present. These vehicles are capable of longer ranges in full-electric mode which explains the higher RVs in absolute and percentage terms. A major decrease is still expected in the coming months.
High-price points in Germany
New-car figures in the first four months of 2023 show that production appears to be recovering slowly. With just under 8% growth compared to the previous year, there is a glimmer of hope. However, this should not obscure the fact that with some 870,000 units, the first four months of 2023 are still far below the seven-digit figures recorded before the COVID-19 pandemic.
In particular, the number of PHEV registrations, which collapsed due to the discontinuation of government incentives at the turn of the year, are weighing on the overall balance. Meanwhile, internal-combustion engine (ICE) vehicles continue to see production and market demand. BEVs are also increasingly joining the roads and continue to benefit from the country’s eco-bonus.
There are, however, a few registration losers. First, the Tesla Model 3 has seen its numbers halved, while its stablemate, the Model Y, was registered three times as often. On the upside, some newcomer brands such as BYD, Lucid, Maxus, Nio, Ora and Wey, are now appearing and will enrich the used-car market.
‘A few older-generation models that used to see strong registrations have finally been phased out, such as the BMW i3 and Smart forfour, so that they will only be encountered on the used-car market,’ said Andreas Geilenbruegge, head of valuations and insights at Schwacke (part of Autovista Group).
‘RVs of expensive used cars are declining, which could be due to their low age, premium brands, or expensive segments. However, their more premium prices are straining already reduced purchasing power,’ he added.
Meanwhile, used cars with lower prices and combustion engines continue to see demand and are capable of maintaining their price position. The declining inflation forecast after 2023, rising new-car prices and ongoing low volumes mean the used-car market is likely to see higher prices remain in the coming years, and maybe even rise further.
Signs of trend reversal in Italy
While months of steady growth brought double-digit year-on-year %RV increases (up 11.4%) in May, a small, but expected, change is worth highlighting. Compared to April, May saw %RVs drop by 0.2%. This is too slight a change to indicate a rapid return to pre-crisis levels, but it is likely the first sign of a reversing trend that will be monitored closely in the coming months. Nevertheless, the decline is proving slower than expected, which has informed a revision in the 2023 RV outlook to an increase of 4.7%.
This trend is observable across almost all fuel types, with the exception of HEVs and PHEVs, both of which grew by 0.5% compared to April 2023. PHEVs saw their list prices increase 44% year-on-year, which is significant compared to an average growth of 9.5%.
‘However, this is not due to any particularly aggressive pricing strategies, but rather that the technology features in larger and more expensive segments, where its advantages are easier to appreciate,’ explained Marco Pasquetti, head of valuations, Autovista Group Italy. ‘Even if transactions are few, it is not surprising that the Porsche Cayenne or BMW X3 are among the fastest-selling models.’
Compared to April, the average sale time increased by 10.7 days, so that the cars sold in May remained in stock for around two months. Finally, the second-hand market for CNG-powered cars is becoming increasingly difficult, with models taking 140 days on average to be sold.
Rentals reign in Spain
The end of April saw new-vehicle sales stay on a positive trajectory established in the first few months of 2023, with an accumulated growth of 34%. According to ANFAC data, sales of EVs continued to rise, up 45% compared to 2022.
This means they are already equal in weight to petrol vehicle sales, although this is still far from the government target. By channels, fleets brought stability, while rental channel renewals brought dynamism to the second-hand market.
‘Rental sales have sustained the second-hand market in recent months, which continues to rapidly absorb these in-demand young vehicles,’ said Ana Azofra, Autovista Group head of valuations and insights, Spain. ‘Despite this, the market is down 2%, due to a shortage of stock in the other channels.’
Meanwhile, previously reported transaction price trends continued, with some stability amidst small negative adjustments for petrol and diesel vehicles. There were improvements in the average transaction price of HEVs and slightly positive adjustments for BEVs. This was more related to the change in mix, with additional weight from premium models and better performance.
In recent weeks a negative trend in PHEV offer prices has been observed. But PHEVs are not alone, with BEVs also coming under pressure. This will eventually be reflected in a fall in transaction prices.
‘This early trend is already being observed in other important European markets, such as Germany and neighbouring Portugal, a market that is further down the electric road than Spain,’ Azofra added. ‘The need for brands to comply with emissions targets, meet infrastructure requirements to enable electric-vehicle development, alongside a certain price war in the new market, might be behind this drop.’
Switzerland sees transaction slump
The Swiss used-car market has experienced significantly increasing supply for several months and is only at a lower level for young-used cars when compared to the pre-COVID-19 era.
The active market volume index for two-to-four-year-old passenger cars was 1.3% lower in May than in April, but 36.4% higher than a year earlier. Additionally, as the cost of living increased, used-car transactions dropped at the beginning of 2023 and show no clear sign of making a recovery from a weak 2022.
Compared to April, the sales volume index dropped by 12.3% but went up 4.3% year on year. With higher supply and diminished demand, the average value retention of a 36-month-old passenger car fell once more to 50.9% in May, down 0.4% month on month, but up 3.6% year on year.
The %RV of HEVs posted a particularly strong year-on-year gain of 18.6%, to 55.7%. This was followed by petrol cars (51.7%), diesel models (49.6%) and BEVs (48.6%). 36-month-old PHEVs retained 48.4% of their original list price.
The average days to sell increased slightly in May, with a passenger car aged two-to-four years in stock for 77 days. HEVs sold the quickest after an average of 43 days, followed by diesel cars after 74 days and petrol cars after 77 days, then PHEVs with 81 days and finally, BEVs after 91 days.
‘As used-car demand is expected to weaken amid overall increasing supply, a further and slightly accelerated decreasing trend can be expected, although values of three-year-old used cars remain relatively high,’ said Hans-Peter Annen, head of valuations and insights, Eurotax Switzerland (part of Autovista Group). ‘The %RV is forecast to finish 2023 down roughly 4% on December 2022. In 2024, RVs are expected to fall by around 3.7% year on year due to increasing supply and lower demand.’
UK used market stays strong
‘The UK’s used-car market remained strong in May,’ said Jayson Whittington, Glass’s (part of Autovista Group) chief editor, cars and leisure vehicles. ‘An average three-year-old car retained 65.9% of its original price, an increase of 8.2% compared to a year ago. That said, compared to April, RVs fell by 0.5%, although this is below the depreciation normally expect at this time of year.’
The sales volume index reveals that retail activity calmed a little in May, falling 4.1% compared to April. The active market volume index showed 5.5% more used cars were available month on month, so the market appears to be slowing slightly which is not uncommon in the run up to summer. At 38.9 days, the average days to sell indicator backs up this change, although this is only an increase of one day.
The %RV of BEVs fell again in May, but this time by only 1.4% month on month, so it could be that they are beginning to find a new price level. BEV models still appear to be a retail challenge, however, with their average days to sell increasing by 5.6 days, up to 58.7 days. That is over 25 days longer than May last year. Their rate of sale also suffered in May, falling by almost 19%, although 256% more BEVs were sold than last year, so it is clear that there remains reasonable demand, just not enough to cope with the increased supply.
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In absolute terms, residual values (RVs) of three-year-old used cars rose year-on-year across European markets last month. While values represented as a retained percentage of the original list price (%RV) also grew, it was to a lesser extent across the board.
Austria saw the greatest increase in %RV at 13.6%, with Italy and Germany following closely behind, posting 11.4% and 10.7% respectively. Meanwhile, the UK was the outlier with a growth of just 0.5% in %RV terms compared to March 2022.
This was not the only instance where the UK went against a larger market trend. Alongside Italy, both countries saw demand outstrip supply. Other European markets experienced the reverse with a greater number of used-car adverts than sales, putting more pressure on RVs.
The %RV of battery-electric vehicles (BEVs) increased across markets, except in the UK where a 9.6% decline was recorded. However, some carmakers recently lowered new-BEV prices to attract consumers outside the early-adopter sphere.
This will most heavily impact the absolute RVs of directly comparable used cars, including very-young used models, demonstrators, and rental vehicles. While older models will also be affected, it will take longer for this effect to cascade.
More broadly, the continual acceleration of electric vehicle (EV) technology means consumers of both new and used cars may hold out for longer as they wait for the latest technological developments and improved ranges. This could mean both lower supply and demand for the used-BEV market.
The interactive monthly market dashboard examines Austria, France, Germany, Italy, Spain, Switzerland, and the UK. It includes a breakdown of key performance indicators by fuel type, including RVs, new-car list prices, selling days, sales-volume and active market-volume indices.
The base-case scenario of low supply and falling demand comes with positives and negatives. If the economic situation in Europe continues to diminish, used-car prices will experience greater pressure as demand drops. Big improvements to supply would only serve to compound this effect.
For example, the automotive industry is still struggling with supply-chain constraints and semiconductor shortages remain. However, a sudden reversal caused by lower demand for consumer electronics could mean a faster solution for carmakers.
VNC Automotive pointed out that the ‘semiconductor drought could soon become a flood of chips.’ If that were the case then supply would likely increase while demand continues to drag, weighing down RVs.
Any increased disruption of new-car supply would benefit used-car prices. This could happen if automotive suppliers suffer from increased costs and economic difficulties. The possibility of the war in Ukraine escalating further also remains. This could damage Europe’s already fragile supply chains. RVs might also climb if there is an unexpected improvement in used-model demand. If new-car deliveries take a hit, more consumers might veer away from the market and buy used cars instead.
RV pressure expected in Austria
Living costs continue to rise in Austria and used-car transactions are slowing compared to 2022. The sales-volume index highlights the weakening demand with a 27.4% decline compared to March last year. Hybrid-electric vehicles (HEVs) were hit hardest once again, suffering a 32.4% year-on-year drop.
Meanwhile, the supply of two-to-four-year-old passenger cars was 28% higher in March 2023 than a year earlier. Yet supply was lower in 2022 than prior to the COVID-19 pandemic, which started affecting the market at the beginning of 2020.
After a slow February, average days to sell decreased to a total of 68.5, confirming the weakening in used-car demand. HEVs and plug-in hybrids (PHEVs) sold the fastest, averaging around 48 days, followed by diesel cars with 67.8 days, then petrol models and BEVs with around 71.7 days.
‘Despite weakening demand and improving supply, residual values of 36-month-old cars have remained stable,’ explained Robert Madas, Eurotax (part of Autovista Group) regional head of valuations, Austria, Switzerland, and Poland. ‘The %RV remained almost unchanged in March with cars retaining 55.4% on average. This marked a 13.6% year-on-year gain.’
HEVs currently have the highest %RV trade value at 60.2%, followed by petrol (55.8%), diesel (55.3%) and PHEVs (55.1%). Meanwhile, 36-month-old BEVs retained the lowest value at 52.2%. While supply recovers, demand is expected to weaken. Therefore, pressure on RVs can be expected. Prices of three-year-old cars will remain relatively high, with just a slightly decreasing trend.
‘The %RV is forecast to end 2023 approximately 2.6% down compared to December 2022. For the year 2024, %RV is expected to decrease further by around 3.4% year on year due to weakening demand and increasing supply,’ Madas added.
BEVs shaken in France
The used-car market was stable in France last month, with slightly lower absolute residual values but marginally higher values in %RV terms. Climbing prices have not influenced RVs as increases have been too steep in recent months.
Fewer private buyers purchased a used vehicle in March. Those who did focused on older models or a lower segment, mainly led by budget. Cars above the 12-year age bracket suffered the least, highlighting that consumers are not following list-price increases.
‘BEV residual values decreased in March. The market has been shaken by lower Tesla list prices, as the brand acts as a BEV reference point,’ said Ludovic Percier, Autovista Group residual value and market analyst for France. ‘Big list price decreases have been followed by drops in %RV, although this has been more severe in absolute terms. Some manufacturers are already following the trend and lowering prices to stay competitive.’
Compared to February, petrol followed the marginally declining market trend in March, while diesel was stable in list price and residual value terms. As new-car buyers have been switching from internal-combustion engine (ICE) models to other powertrains in recent years, used-car market availability is lower.
Despite the implementation of low-emission zones (ZFE) and the diesel’s blemished reputation, their RVs did not drop by much compared to February. ZFEs only impact cities with 150,000 inhabitants or more and does not affect drivers covering high mileages. However, from late 2024 and into 2025, diesel will be more heavily impacted.
‘Hybrid RVs remained stable with a very slight increase in absolute terms,’ Percier said. ‘PHEVs experienced an increase month on month, as there were a lower number of vehicles compared with February. There were also more premium models present on the used-car market, with higher ranges in full-electric mode. A major decrease is still expected in mid-2023.’
Market sensitivity in Germany
Looking back at new-vehicle registrations over the past six months from February, production capacity appears to be slowly recovering. Compared to the previous year, more than 200,000 additional units were registered, which was driven in no small part by the expiry or reduction of PHEV and BEV subsidies.
‘Tactical registrations are also picking up speed again, growing by 13% over the same period. At least 60% of this growth is due to electrified powertrains and foreshadows growing price pressure on the young-used-car market,’ said explained Andreas Geilenbruegge, head of valuations and insights at Schwacke (part of Autovista Group).
The consequences are already visible with stronger price corrections for PHEVs and BEVs, while registrations of ICE models are up slightly again. However, this should not obscure the fact that the total number is still well below the pre-COVID-19 level and will contribute to the stability of RVs in the long term.
‘Overall, offer prices across all ages and drive types remain high, but increasing stock days will encourage some sellers to lower prices,’ Geilenbruegge said. ‘The used-car market’s usually strong summer months are set to follow. Inexpensive mobility seems to be in particularly high demand, considering the continuous positive developments in the small and mini segment.’
In general, classic body types are doing better than their SUV counterparts thanks to their usually lower price. This highlights the market’s current sensitivity and level of consumer exhaustion in terms of purchasing power and willingness to buy.
Stability indicated in Italy
Last month’s new-car market sales volumes confirmed the recovery observed in January, with an increase of 18.4% compared to the first two months of 2022. However, the sales-volume index highlights that transactions on the used-car market are still not declining, with a growth of 1.4% compared to February, and even 25.7% compared to a year ago. In general, almost all fuel types are seeing sales up compared to February or are at least relatively stable.
‘The only exceptions are HEVs and PHEVs, down 10.3% and 5.4% month-on-month respectively. Meanwhile, CNG suffered the biggest drop at 56.4%. The fact that most manufacturers have abandoned this fuel type, alongside its rising cost per kilogramme, is certainly influencing this trend,’ commented Marco Pasquetti, head of valuations, Autovista Group Italy.
‘In %RV terms there was weak growth (up 0.3%), indicating a more stable situation. This is probably the prelude to a trend reversal that has not yet materialised, but which some remarketing professionals are beginning to detect and report,’ Pasquetti said.
From Q4 2022 onwards, however, the price has been falling sharply. This trend is likely to have a positive influence on %RVs, which currently stand at 44.3% compared to an average of 55.6%, down 4.4% compared to March 2022.
Breathing space for Spain
With more caution than optimism, the first quarter of 2023 gave Spain’s automotive sector a little breathing space. New-vehicle registrations were up 20% year on year in February. Although some of these deliveries come from orders placed in 2022, supply capacity has improved. This increase helps fulfil demand from fleet operators, enabling renewals and injecting young used vehicles into the market.
‘In this respect, used-vehicle transactions improved month on month and year on year. Although the overall variation is slight – up 3% in both cases – the age of these vehicles is significant. Sales of used models less than a year old and those between one- and three-years-old grew more than 20% and over 10% respectively,’ said Ana Azofra, Autovista Group head of valuations and insights, Spain.
‘This rejuvenation of supply is a relief to professionals who have capitalised on most of these sales. In any case, the market has quickly absorbed these young vehicles and the active supply of used models is again down by 20%, so the outlook remains optimistic,’ she added.
The month saw almost imperceptibly small negative adjustments to the transaction prices of petrol and diesel vehicles compared to February 2023. BEVs saw a slightly positive correction, more related to the change in the mix, with an increasing share of premium models featuring better performance.
The winners continue to be HEVs, with a growth of 2.3% compared to the previous month. Toyota led the ranking of models but this was not only among hybrids, where it is more logical to find them due to the weight of the brand, but also in the general ranking of all fuels. The five fastest-selling models in March were the Toyota RAV-4, Yaris, C-HR, Aygo and Citroën C4.
Meanwhile, the volume of used PHEVs on offer rose 75% compared to 2022. But they are not performing well in terms of turnover, with the number of days needed to sell increasing and transaction values showing a negative trend.
Transactions slow in Switzerland
The Swiss used-car market continued to see rising supply, with young used cars the only exception compared with the pre-COVID-19 period. The active-market volume index was 1.8% higher for two-to-four-year-old passenger cars in March compared to February, and 40.7% higher year on year.
‘With the rising costs of living, used-car transactions continued slowing compared to 2022,’ said Hans-Peter Annen, head of valuations and insights, Eurotax Switzerland (part of Autovista Group). ‘The sales-volume index remains on the growth path with a 4.2% increase compared to February, and a 3.2% increase year on year.’
As supply rose and demand sank slightly, the average value retention of 36-month-old passenger cars decreased to 51.3% in March, down 0.8% month on month, but still up 7.5% year on year.
HEVs posted a particularly strong year-on-year %RV gain of 20%, retaining 54.7% of their list price value. This was followed by petrol (52.1%), diesel (50%) and BEVs (49.4%). Meanwhile, 36-month-old PHEVs retained the lowest value, at 48.9% of their original list price.
The average days to sell remained unchanged in March, two-to-four-year-old passenger cars in stock for 76.5 days. HEVs sold the quickest, after an average of 66.7 days, followed by BEVs after 73.7 days and PHEVs at 75.2 days, then petrol and diesel cars after 76.5 and 77.4 days respectively.
‘Used-car demand is expected to weaken amid stable supply, a further decreasing trend is to be expected although values of three-year-old used cars remain relatively high,’ Annen said. ‘The %RV is forecast to finish 2023 around 3.1% down on December 2022. For 2024, RVs are expected to fall by around 3.7% year on year due to increasing supply and weakening demand.’
Mixed electric fortunes in UK
The UK’s used-car market was buoyant in March, with the number of days to sell falling by 4.8 days compared to February. At just 39.3 days, this was 15.9 fewer than last year. The sales-volume index confirms that strong retail demand was present, with 17.3% more cars sold compared to March 2022. At the same time, supply slowed, as confirmed by the active-market volume index which shows 25.1% fewer cars were available compared to March 2022.
‘As a result of increased demand and diminished supply, the average residual value of a three-year-old car grew by 2.4% compared with February,’ explained Jayson Whittington, Glass’s (part of Autovista Group) chief editor, cars and leisure vehicles. ‘Although a proportion of the uplift is due to March’s registration plate change effect, a direct comparison with the same plate last year still shows an increase of 0.5%.’
Petrol cars experienced a %RVincrease of 1.8% year on year, meanwhile, diesel models fell by 1.3%. HEVs were down by 0.3% and PHEVs increased by 0.5%. BEVs experienced the largest movement, falling 9.6% in %RV terms compared to March 2022.
All-electric models remain under serious pressure in wholesale channels, with RVs expected to continue to decline in the short term. But BEVs do continue to see very good retail demand. The sales-volume index shows a massive 386.6% year-on-year increase in sales. However, demand is failing to keep pace with the increase in supply.
‘One factor of concern for dealers is the length of time it takes to sell a BEV, which is currently 52.5 days on average, versus the general average of just 39.3. Therefore, with the potential risk of two costly book drops before retailing a BEV, it is easy to understand why dealers have become cautious and auction hammer prices have been in decline,’ Whittington added.
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The average residual value (RV) of a three-year-old used car increased across most European markets in January, except for modest corrections in France and Switzerland.
Used-car prices outpaced list-price developments in most markets. Accordingly, values of three-year-old used cars, represented as a retained percentage of their original list price (%RV), either held firm or gained last month, except in Austria and France. This aligns with double-digit year-on-year declines in the sales-volume index in the two markets.
Although there are grounds for cautious economic optimism, the cost-of-living crisis will invariably erode consumer demand for used cars, which would ordinarily put pressure on RVs. However, in addition to new-car supply challenges, the COVID-19 pandemic significantly derailed the European new-car market from March 2020 onwards. This will acutely reduce the volume of cars de-fleeting after three years.
So, undersupply into the used-car market is expected to persist, which will compensate for diminishing demand. Accordingly, Autovista Group forecasts that the %RV will not decline significantly across European markets in 2023 and 2024.
Battery-electric vehicles (BEVs) face unique challenges. On one hand, the surge in registrations in Germany at the end of 2022 does not bode well for RVs in the short term. Furthermore, Tesla has reduced list prices, which is having a ripple effect across the prices of its used models and BEVs in general. On the other hand, values stand to gain with lower incentives available in France and Germany and as countries introduce more low-emission zones.
Nevertheless, their low share in new-car markets such as Italy and Spain, and even weaker used-car presence, limits their potential, along with concerns over charging infrastructure.
The interactive monthly market dashboard examines Austria, France, Germany, Italy, Spain, Switzerland, and the UK. It includes a breakdown of key performance indicators by fuel type, including RVs, new-car list prices, selling days, sales-volume and active market-volume indices.
There are upsides and downsides to this base-case scenario of undersupply and diminishing demand. Used-car prices will come under greater pressure if the economic situation deteriorates in Europe, with a greater negative impact on demand. This would be compounded if there are significant supply improvements.
For example, lower demand for consumer electronics could see a quicker resolution to the semiconductor shortages in the automotive industry. According to VNC Automotive, the ‘semiconductor drought could soon become a flood of chips.’
Conversely, there are risks of greater disruption to new-car supply, which would benefit used-car prices. Automotive suppliers could succumb to mounting costs and economic headwinds. The risk of the war in Ukraine escalating remains too, with potential consequences for Europe’s fragile supply chains. Any unforeseen improvement in used-car demand, either if fewer new models can be delivered or consumers defect to buying used instead of new, would also push RVs higher.
Modest pricing decline in Austria
Living costs are rising in Austria and used-car transactions are slowing down compared to 2022. The sales-volume index clearly shows weakening demand in January, with a year-on-year decline of 20.5%. Conversely, the supply volume of passenger cars aged two-to-four years was 22.2% higher year on year. Average days to sell have increased to 73.5 days.
Hybrid-electric vehicles (HEVs) are currently selling the fastest, averaging 50.6 days, followed by BEVs with 59.7 days, petrol cars with 73.2 days and diesel cars with 73.6 days. Plug-in hybrids (PHEVs) are selling the slowest, averaging around 104 days.
Despite weakening demand and improving supply, RVs of 36-month-old cars have remained relatively stable. The average %RV decreased by 0.6% month on month in January, with cars retaining 54.9% of their list price on average. This marks a solid 17.7% year-on-year gain.
HEVs are currently leading with a trade value of 58.4% of their original list price, followed by PHEVs (55.8%), then diesel cars and petrol cars (both 54.9%). 36-month-old BEVs retain the lowest value, at 53.6% of list price.
As demand is expected to weaken while supply recovers, pressure on RVs is anticipated. Robert Madas, Eurotax (part of Autovista Group) regional head of valuations, Austria, Switzerland, and Poland, forecasts that the %RV will end 2023 approximately 3% down on December 2022. Nevertheless, prices of three-year-old used cars will remain relatively high. For 2024, Madas predicts that the %RV will decrease by a further 3.6% year on year due to weakening demand and increasing supply.
Buyers await lower prices in France
The French used-car market has seen drastic changes since 2021, with rising RVs amid list-price increases and limited availability of new and, in turn, used cars. The market stabilisation since the end of 2022 was confirmed in January 2023 with the %RV falling 1.5% month on month.
‘Higher list prices are no longer influencing used prices, which is reflected in the poor development of the sales-volume index as buyers are holding back, expecting lower sales prices. Private buyers are focused on older vehicles or lower segments than usual, mainly led by budget. Accordingly, values of used cars aged over 12 years are suffering the least,’ explained Ludovic Percier, residual value and market analyst, France, at Autovista Group.
The %RV of all fuel types is either stable or in decline, except for healthy price growth for BEVs. ‘Vehicles available on the used-car market now offer a higher range, which previously limited the usability of vehicles and the number of customers,’ Percier commented. Nevertheless, BEVs still have the lowest values in both absolute and value-retention terms.
RVs of petrol and diesel cars are subtly declining after ongoing increases in recent months due to new-car shortages, long delivery times, and higher list prices. Furthermore, as new-car buyers have been switching from internal-combustion engines (ICE) to other fuel types over the last two years, this reduced their availability on the used-car market and drove prices higher.
Even with the rollout of low-emission zones (ZFEs) and a tarnished image, RVs of diesel engine cars are falling slowly. ZFEs are only in towns and cities with at least 150,000 inhabitants and do not target high-mileage drivers, but will have a bigger impact on diesel from late 2024 and into 2025.
PHEV values should remain stable for the time being but they already decreased slightly at the end of last year and Percier anticipates further declines from mid-2023 onwards.
EVs under pressure in Germany
The high volume of new-car registrations in December ‘is a prime example of how extraordinarily the German new-car market has been distorted by external influences in recent years and how the implicit mechanisms of supply and demand are being undermined,’ explained Andreas Geilenbruegge, head of valuations and insights at Schwacke (part of Autovista Group).
The prospect of a lower environmental bonus for BEVs and the end of incentives for PHEVs from 1 January meant every eligible car coming off the production line with registration papers, was taken to registration offices to receive the subsidy. January is therefore expected to be a well below-average month, due to the huge number of registrations that were brought forward.
‘For used electric vehicles, this means that the high price level will come under increasing pressure but experience a strong rebound in the coming months. However, residual values for most vehicles continue to stabilise at a high level and show only slight signs of fatigue due to the loss of purchasing power and reluctance to buy. Stock days are also still in a moderate to favourable range,’ Geilenbruegge noted.
Since January is not known for unusual activity from a used-car point of view, it will only become clear from the spring onwards how far values may decline. This will depend not least on the recovery of production and supply before prices presumably take another slight upturn later in the year.
ICE cars will continue to become increasingly rare and the absence of incentives for used electric vehicles (EVs) will maintain stable prices. The soaring prices of new cars will also keep used cars very attractive.
Meanwhile, Tesla has recently caused quite a stir in the industry with a move in the opposite direction. ‘Ultimately, this does a disservice to value retention and not only of the company’s own models,’ Geilenbruegge concluded.
‘Awareness of BEVs is growing’ in Italy
The new year started in the same way 2022 ended in Italy, with RVs increasing sharply, especially compared to a year ago. ‘Suffice to say that a 36-month-old used car with 60,000km on the clock has an average residual value of around €18,900, i.e. almost €2,000 more than in January 2022,’ commented Marco Pasquetti, head of valuations, Autovista Group Italy.
The volume of sales recorded through the main portals, represented by the sales-volume index, also indicates a growing used-car market (up 9.5% compared to December), even though vehicles remain in stock 24 days longer than a year ago.
Used BEVs enjoyed especially strong value growth in January, up 14.8% year-on-year, with the sales-volume index rising by a phenomenal 160.5% year on year. ‘Awareness of BEVs is certainly growing in Italy, but it is still advisable to remain cautious as their share remains very low in the new-car market, at 3.7% in 2022, and especially in the used-car market,’ said Pasquetti.
Pasquetti expects RVs to be higher at the end of 2023 than in December 2022 due to inflation and supply problems, albeit with significantly slower growth than last year.
Lack of stock ‘weighing down’ Spain
The Spanish new-car market closed 2022 with 813,396 registrations and a year-on-year decline of 5.4%. In addition to established supply issues, transport problems constrained the sector further. In 2023, registrations are expected to improve but this depends on what happens to inflation, interest rates, energy prices and, ultimately, how the war in Ukraine develops.
ICE vehicles account for 64% of new-car registrations in Spain. Of the remaining 36%, HEVs capture the largest share (25%). BEVs and PHEVs account for only 9% of the market, in line with Italy, which is clearly below the European average (19%) and neighbouring countries such as Portugal, where they already have a 21% share.
The used-car market also finished 2022 below forecasts, with a string of declines throughout the year. In total, 1,885,553 units were transacted according to the Spanish dealers’ association GANVAM, resulting in a ratio of 2.3 used cars for each new car registered.
‘The lack of stock is weighing down the possibilities of a market that tends to benefit in times of crisis. The limited availability of product mainly applies to younger vehicles, which tend to be in the hands of the dealer network, while the weight of vehicles over 10 years old continues to increase considerably,’ explained Ana Azofra, Autovista Group head of valuations and insights, Spain.
With regard to average RVs, after the usual adjustments at the end and beginning of each year, Azofra expects stability in the coming months. ‘There is a modest downward trend for petrol cars but HEVs are escaping this fate as they are in high demand, with quick turnaround times, as they will benefit from the implementation of zero-emission zones in almost 150 Spanish cities.’
‘It would be expected that BEVs could also benefit from this development but, for the time being, they do not even command a 1% share of the used-car market. As long as the charging infrastructure does not improve, the chances of developing a second-hand electric market are slim,’ Azofra concluded.
RVs stable in Switzerland despite demand
‘The Swiss used-car market has experienced increasing supply for several months, but it is still lower than before the pandemic, especially for younger used cars. Moreover, with rising costs of living, used-car transactions continue to slow down compared to the first half of 2022,’ noted Hans-Peter Annen, head of valuations and insights, Eurotax Switzerland (part of Autovista Group).
Across all two-to-four-year-old passenger cars, the active-market volume in January was 1.8% higher than a month earlier, and 39.2% higher than in January 2022. On the other hand, the sales-volume index has retreated further, with a 10.5% decrease compared to December, albeit with only a small 0.2% decline year on year.
Despite cooling demand, the average value retention of 36-month-old passenger cars grew slightly to 52.6% in January (up 1% month on month and up 13.5% year on year). BEVs posted particularly strong year-on-year %RV gains of 21.4%. Nevertheless, petrol cars are currently leading, retaining 53.4% of their original list price, followed by HEVs (52.0%), BEVs and diesel cars (both 51.2%). 36-month-old PHEVs retain the lowest value, at 49.8% of their original list price.
The average days to sell clearly increased in January, with a passenger car aged two to four years in stock for 73 days. Petrol cars are selling the quickest, after an average of 72 days, followed by diesel cars after 73 days, PHEVs after 79 days, BEVs after 81 days, and HEVs after 84 days.
As used-car demand is expected to weaken amid recovering supply, Annen foresees a slightly decreasing trend but values of three-year-old used cars will remain relatively high. He forecasts that the %RV will finish 2023 around 3% down on December 2022. For 2024, Annen expects RVs to fall by around 3.7% year on year due to weakening demand and increasing supply.
RVs strengthen in UK, except for BEVs
‘The UK’s used-car market returned to seasonal norms in January, with an uptick in demand. Although the month began slowly, wholesale activity ramped up as the month progressed. The Glass’s editorial team observed auction conversion rates approaching 80%, something not seen regularly throughout 2022,’ explained Jayson Whittington, Glass’s (part of Autovista Group) chief editor, cars and leisure vehicles.
RVs for all fuel types strengthened in January, except for BEVs. There has been an especially sharp increase in available volumes of used BEVs according to the active-market volume index, which shows a rise of 41.7% compared to December. BEVs also performed poorly in the last quarter of 2022 and, as a result, values have fallen sharply in recent weeks. The average value of a three-year-old BEV now sits at 59% of the original list price, a fall of 6.6% compared to December.
‘As values have fallen sharply, there is a risk that dealers may become reluctant to buy BEVs speculatively, in fear that prices will continue falling and wipe out any profit margin. This will of course affect demand further. Tesla’s recent move to reduce new-car prices is also likely to affect used values and may lead to other brands suffering more depreciation as consumers evaluate what they can now get for their money,’ commented Whittington.
However, it is worth remembering that used BEV values were reasonably high throughout 2022, the result of a spike in interest from retail consumers and businesses looking to avoid waiting up to a year for a new one. At three years of age, used BEV prices are 4.9% higher than in January last year.
‘Although BEV values are potentially facing a correction, they are only narrowly behind other fuel types when expressed as a percentage of their original list price,’ Whittington concluded.
The January 2023 monthly market dashboard provides the latest pricing, volume and selling-days data.
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