Motor Vehicle Price Index

IBISWorld forecasts the motor vehicle price index to decline by 3.2% in 2023-24 to 106.4 points. This decline is expected to be driven by an improvement in supply conditions for new and used motor vehicles. Over the three years through 2022-23, prices were inflated by supply chain constraints driven by the pandemic, particularly for crucial components such as semiconductors. As global chains have rebuilt capacity, supply shortages are gradually easing, which is set to place downward pressure on prices in 2023-24. The price of second-hand vehicles was especially inflated in the past few years, as consumers flocked to purchase used cars that are not subject to supply delays, especially compared with new vehicles. Although prices are easing, they are set to remain well above pre-pandemic levels; an uptick in wage growth has allowed dealerships to keep prices elevated without substantially hurting demand.

Vehicle prices in Australia have largely declined since 1995-96 as the Federal Government opened up the domestic automotive manufacturing sector to foreign competition. Tariffs on imported vehicles fell from 45% in 1995 to 25% the following year. The tariff has since been on a long-term decline, eventually falling to its current level of 5% in 2010. Additionally, the exits of Ford in 2016 and Toyota and GM Holden from the Australian Motor Vehicle Manufacturing industry in 2017 have ensured an increasing share of domestic demand for passenger motor vehicles has been satisfied by imported cars. Since these imported vehicles are generally sold at lower prices, this has created a downward trend in average motor vehicle prices over the long term.