Motor Vehicle Price Index

IBISWorld forecasts the motor vehicle price index to fall by 1.7% in 2024-25, to 98.3 points. Global production of new vehicles is expected to rise as supply chain disruptions continue to ease. Rising production will likely place downward pressure on prices. Greater supply of new cars is set to soften demand for used cars, with these prices. Furthermore, in December 2023, the New Zealand Government ended the Clean Car Discount Scheme (CCDS). While this reduced prices for hybrid and electric vehicles, it added a fee on new combustion engine vehicles. Combustion engine vehicles are typically cheaper than electric and hybrid vehicles. The ending of the CCDS will likely boost demand for cheaper, combustion engine vehicles, reducing average prices.

The value of the New Zealand dollar has a significant effect on the motor vehicle price index. Imports account for the overwhelming majority of New Zealand motor vehicles. All new cars are imported into New Zealand for sale on the domestic market. Additionally, a large number of used cars are also imported into New Zealand, particularly from locations such as Japan. The trade-weighted index can have a strong influence on the price of these vehicles, with domestic prices rising if the New Zealand dollar depreciates. This trend can be particularly true for used cars, as these are less likely to have prices set by major international car manufacturers. The New Zealand dollar has depreciated over the past five years, which has placed upwards pressure on the price of imported cars. Additionally, a severe shortage of semiconductors and a surge in shipping costs, which has increased the cost of importing vehicles to New Zealand, has also boosted the motor vehicle price index, as motor vehicle sellers have passed these extra costs onto consumers.