By Jessica Yun
The chief executive of Carsales.com has said used vehicle prices will remain elevated for the remainder of 2022 amid supply chain constraints and high demand.
Car purchases skyrocketed during the pandemic as people gave public transport a wide berth, international travel was barred and people were able to work remotely, sparking a shift of city dwellers to regional areas.
Carsales chief executive Cameron McIntyre.Credit: Arsineh Houspian
Used car prices are between 30 and 40 per cent higher than pre-pandemic levels and Carsales.com CEO Cameron McIntyre said the average cost of a used car on the website today hovered around $35,000, compared to pre-pandemic range of $20,000s.
“My view is that they’ll be sustained at a high level for some time … the majority of this year,” Mr McIntyre told the Sydney Morning Herald and The Age.
Ongoing global supply chain issues are continuing to constrain stock levels, while demand remains high, he said. “Consumers over the last two years have saved a lot of money. Unemployment rates are very low; people are feeling confident. And so demand, I suspect, will be sustainably high,” he said. He also noted that Australians unable to travel internationally were opting to purchase a car.
There is also strong demand for trucks, boats and caravans, and is a trend being observed around the world, he added.
The world is also still grappling with a shortage of semiconductor chips, which hamstrung global automotive industries for most of 2020 and 2021. This shortage, which is expected to start easing this year, is partly driving the rise of vehicle prices.
Demand for cars has also played out in Australian Bureau of Statistics data, which showed the value of road vehicle imports reached $4.23 billion in December 2021, the second-highest month on record.
Mr McIntyre is not concerned about the impact rising interest rates would have on demand for cars, which he said had little to do with purchasing decision-making.
The Reserve Bank of Australia’s governor Philip Lowe, who for several months had signalled the central bank did not expect to hike rates until 2024, recently said a rate rise could be on the cards for “some time later this year”.
Mr McIntyre said “there isn’t a strong correlation at all” between a change in interest rates and car-buying activity. “People don’t tend to think about [interest rates] … what they do tend to think about when they buy cars is those lifestyle issues, change of jobs, et cetera,” he said.
Carsales.com released its 2022 half-yearly results on Monday, posting a 22 per cent jump in profits to $75 million. Revenue also jumped 22 per cent to $242 million, and the company is issuing fully franked interim dividends of 25.5 cents per share.
The company’s share price closed up 0.23 per cent to $21.65 on Monday.
In a note, Royal Bank of Canada equity research director Wei-Weng Cheng described the half-yearly figures as a “solid result” but said supply chain issues remained a challenge.
“We think [the second half of the 2022 financial year] could see further ramp-up in revenue, as we have seen listing volumes on Carsales.com platforms increase,” Mr Cheng wrote. “However, tight supply of both new and used cars continues to be a headwind in the short term.”
Mr Cheng also noted that while revenue and cash generation were above expectations among the core Australian businesses, revenue in some international divisions including South Korea and Latin America weren’t as high as expected. Asia and Latin America, which saw weaker margins, have “lagged in performance,” Mr Cheng wrote.
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