Demand and Supply Analysis of Used Cars in Australia Essay (Critical Writing)

The Australian market of automobiles has experienced a drastic increase in prices due to the global shortage of semiconductors during the COVID-19 pandemic. At the same time, the supply deficit of new cars stimulated the market for secondhand vehicles, leading to a significant increase in prices¹. Experts predict the continuation of this trend for at least twelve months until the supply chains return to normal functioning². Concerning statistics, the overall car sales accounted for 917,000 in 2020 and 1,050,000 in 2021³. This trend demonstrates that supply is gradually returning to its pre-pandemic numbers, although these numbers are still lower than the sales in 2018.

For the specific car, I have chosen the 2012 Mazda CX-5 Maxx. According to the data, the price of the vehicle has increased from $14,000 in 2019 to $20,000 at the end of 2021⁴. Depending on the conditions and specs, the price for the used car at the beginning of 2020 was approximately $10,000 -$12000. At the beginning of 2021, most listings accounted for nearly $15000-17,500⁵. Based on this data, it is possible to create the demand and supply (D&S) model for the 2012 Mazda CX-5 Maxx in the market of secondhand cars (see Fig. 1).

The graph demonstrates the pricing increase of 2012 Mazda CX-5 Maxx used cars from the start of 2020 to the beginning of 2021. The analysis supports the empirical data concerning the boom of the secondhand car market in Australia. However, if the expert estimations are correct, the situation might change drastically in 2023. In this case, the prices of the 2012 Mazda CX-5 Maxx might reduce to approximately $8000-$10000 per vehicle, depending on the specs and conditions. Ultimately, the supply chains will return to normal, leading to an overall decrease in prices on the market of secondhand cars in Australia in 2023.

Bibliography

Alexis Carey, “Experts Reveal Why You Should Wait to Buy a Car as Industry Faces Soaring Prices and Supply Crisis,”News, 2022.

Andrew Chesterton, “Australian Car Market: Car Sales, Statistics and Figures,”CarsGuide, 2022.

Byron Mathioudakis, “How to Beat the Used Car Price Boom? Due to a Car Shortage, We Are Seeing the Price of Second-Hand Cars Skyrocket – Is Australia in a Car Bubble?”CarsGuide, 2021.

Royce Kurmelovs, “Secondhand Cars: Why Are They So Expensive and When Will the Prices Drop?”The Guardian, 2022.

Footnotes

1. Royce Kurmelovs, “Secondhand Cars: Why Are They So Expensive and When Will the Prices Drop?” The Guardian, 2022. Web.
2. Alexis Carey, “Experts Reveal Why You Should Wait to Buy a Car as Industry Faces Soaring Prices and Supply Crisis,” News, 2022. Web.
3. Andrew Chesterton, “Australian Car Market: Car Sales, Statistics and Figures,” CarsGuide, 2022. Web.
4. Byron Mathioudakis, “How to Beat the Used Car Price Boom? Due to a Car Shortage We Are Seeing the Price of Second Hand Cars Skyrocket – Is Australia in a Car Bubble?” CarsGuide, 2021. Web.
5. Mathioudakis, “How to Beat the Used Car Price Boom? Due to a Car Shortage We Are Seeing the Price of Second Hand Cars Skyrocket – Is Australia in a Car Bubble?”