This is how Sweden's vehicle fleet is doing after the pandemic and interest rate hikes

The last few years have been a roller coaster ride for the automotive industry. A pandemic and war that led to disruptions in the retail chains and component shortages. And then interest rates started to rise. But now it's starting to level out, isn't it? Because what's the real state of Sweden's total vehicle fleet?

To begin with, we can say that it is getting older, with all that that means. Which is quite a lot, says Karl Wahlin, analyst at Kvdbil 's sister site Bilpriser.se .

Let's start from the beginning, or rather from the time after the pandemic. When the shortage of the sought-after components put a damper on the entire new car industry, with long delivery times as a result. Today, that problem has both been solved and replaced by others; including the economic headache that has hit the world's car manufacturers due to rising interest rates. And on top of that comes the introduction of protective tariffs .

Economic conflict

– Now it's more about the economic conflict that could potentially create problems and disrupt supply chains, says Karl Wahlin.

The conflict he refers to is the one about increased import taxes on Chinese electric cars, where the US and Europe are on one side and China on the other.

– Many car parts come from China, including batteries and technology. Punitive tariffs on cars could lead to countermeasures, which has already happened. As long as we are dependent on Chinese parts and components, there is a risk that we will encounter problems because such a large proportion of European production actually ends up in China.

Weak krona threatens imports

When it comes to batteries, one might ask whether the vehicle fleet should not be getting younger as fossil fuels are replaced by renewable alternatives. But it is not that simple, says Wahlin. The average age of the vehicle fleet is controlled by several factors such as new sales, imports, exports and scrapping. Right now, with the weak Swedish krona, imports are minimal, while exports are increasing because it is advantageous for buyers with euros in their pockets to buy cars in Sweden. In addition, the number of scrapped cars is falling, although we saw a temporary increase earlier this year, which can partly be explained by the unusually long and icy winter.

– What is happening is that the proportion of electrified cars, i.e. plug-in hybrids and pure electric cars, is increasing, he says and elaborates:

– Today, around five percent of the cars on Swedish roads are electric cars. At the current growth rate, electric cars will only make up 50 percent of the vehicle fleet around 2040. To reach the goal faster, a sharp increase in sales is needed, even though electric cars and plug-in hybrids are already common on the roads.

The electrification journey is going faster than statistics show

That is something that gives further perspective, says Karl Wahlin. Because it certainly feels as if the electric part of our total fleet should be higher?

– When I sit in a traffic jam and look around, there are often many plug-in hybrids and electric cars nearby, sometimes even more than traditional petrol and diesel cars. Then I tend to think that not all cars are used equally.

What does Karl Wahlin mean now? Well, that the mileage is not evenly distributed between different fuels. Electric cars are significantly more common as company cars, which on average are driven much more than private cars.

– Therefore, I believe that electrified cars account for a significantly larger proportion of the kilometres driven than the number of vehicles gives the impression of. Although there are no exact statistics on this yet, it probably means that we have come further on the electrification journey than the proportion of electric cars suggests, he explains.

What impact does the reduced number of scrapped vehicles and the fact that more people are choosing to repair and keep their cars have on the used car market?

– This is a development that is influenced by the age of the fleet and variations in sales volumes. We use statistics on the number of passages through the toll networks in Stockholm and Gothenburg, where we can see that the number of passages is quite stable from year to year. This means that the influx of used cars into the market has decreased, while the need for transport remains constant.

This, Wahlin says, results in a classic economic supply and demand equation: when supply decreases and demand is constant, the price rises. This is exactly what we see in the used market, where prices are historically high.

All in all, this has led to an increase in the average price of used cars, although the price trend varies depending on the type of car. Some cars are more attractive than others. Newer, used diesel cars and larger vehicles are often exported to Eastern Europe. At the same time, Danes, Norwegians and Finns are happy to import our newer used electric cars and plug-in hybrids.

– It is clear that the average age of passenger cars has increased quite dramatically. For many years, the average age of the Swedish vehicle fleet was relatively constant. Since then we have seen this development, and the question is whether the curve will flatten out now. This should happen when the economic climate improves and interest rates fall, but it will take time, concludes Karl Wahlin.