Trusting used car dealers

A loyal anonymous reader, likely employed at the Ministry of Transport, seems aggrieved by my prior post. Here's his comment, and my attempt at an answer. I'll let y'all do the grading of the question and the answer.

Ok, I think we can accept that the government decision is beat you over the head with a stick stupid and that all bloggers are mensa graduates with perfect information so answer me the following please:

1) If MOT data shows no correlation between the volume of used vehicles being imported and the volume of vehicles being scrapped why does this change on 1 January? 

2) If stats NZ CPI reports that the average used car price shows no correlation with used vehicle import volumes why does this relationship change on 1 January?

3)If Mr Vinsen has said that imports will halve and prices double virtually every year since 2005, and they have not, why is he right this time? 

4)If the new rule only requires imports of newer vehicles, how much more expensive does that make the vehicles already in the fleet?

5)If the average age of the fleet is 13 years, how much younger does it get from importing yet more 12 year old vehicles? 

6)When did you start trusting used car sales men for advice on anything?

You have three hours.

I lost the first 90 minutes of the challenge as my computer doesn't boot up before 9 am. But here goes anyway. In reverse order.

6) I never said that I trusted his numbers, just the sign of the number. I said I was agnostic about magnitude; it's not something I've looked into. From the initial post:

I have no sense of whether Vinsen's estimate of the price effects are correct. He is undoubtedly correct about the direction of the change. I'm agnostic about magnitude.

5) That'll depend on how much more expensive relatively newer vehicles get. If a bunch of folks with 18 year old cars become less likely to switch up to 15 year old cars because the folks with 15 year old cars aren't trading up to 12 year old cars, the mean gets pushed back, right? If the price rise for 12 year old vehicles is big enough, then the fleet can age substantially. If the price rise is small, so too will be the effect on fleet age.

4) It can have big effects at the margin, but will depend on relative elasticity of supply and demand. It's easy for the effects to work their way all the way down the line though, right? If the cohort who'd usually purchase 10 year old Japanese imports and sell off their 15 year old Japanese imports hold off trading in for a few years because the price of newly imported used vehicles has gone up, then the supply of domestic older used cars goes up, etc. As for magnitude, that's something I could set up as an honours project for a student but not something I'm going to try doing now. Especially not under a time constraint.

3) Again, I'm agnostic on magnitude. But not on sign. See above.

2) My first cut answer would be that the supply curve is near-horizontal over the relevant range. NZ demand is a small part of the overall market. As soon as there's any price pressure here, increased imports keep things in line. We'd then see no correlation between domestic price and used vehicle import volumes.

1) I'm having a hard time reckoning how there's no relationship between imports and scraps prior to 1 January; I'd have to understand that prior to working through the comparative statics. Surely every car that is imported eventually is scrapped - we don't export our low value castoffs to anybody else given shipping costs. Or at least I'd be really surprised if we did. The only way there's no correlation then between imports and scrap is if we're still in disequilibrium - that there are lots of individuals who want to have a second car where the price is low enough but haven't yet acquired that second car. In equilibrium, the guy importing the 10 year old Honda sells his 15 year old Honda to a guy who sells his 20 year old Honda to a guy who sells his 25 year old Honda to a guy who scraps his 30 year old Honda. In disequilibrium, there's a market for those 25 year old Hondas as second cars that are rarely driven. If that's the world, and the price of the 10 year old Hondas rises, a lot of those 25 year old Hondas remain the daily drivers for poorer folks rather than turning into the second car for slightly less poor people. Mileage adjusted fleet age rises.

I haven't access to the MoT data cited. But if the commenter does, and is interested in providing some of it for an honours project two years from now (roughly long enough for effects to start working their way though), I'd be more than happy to supervise an Honours project using that data to examine the effects of the regulatory change. As mentioned, I'm agnostic on magnitudes. But I'd love to find out!