Cox Automotive UK has published its first analysis of the impact of Covid-19 on the wholesale and retail markets for new and used cars, as well as LCVs.
Key findings include:
- New car registrations predicted to fall 26% against forecast (1.67m vs 2.27m);
- Used car volumes likely to fall 19% (6.40m vs 7.99m);
- LCV volumes expected to track in line with the SMMT’s prediction of a 25% decline vs forecast (275k vs 347k).
The automotive services company anticipates the sector will experience a ‘stop-start’ recovery, with the remainder of 2020 unlikely to return to any version of normality.
It also cautions that May and June will not be indicative of the longer-term picture, with pent-up demand and initial oversupply leading to a short-term spike in transactions before supply shortages starve the market of new and used stock.
Disrupted renewal cycles, subdued consumer confidence, fleet rationalisation and shifting personal mobility preferences will make for an unpredictable remainder of 2020.
But despite the inevitable impact on new and used vehicle sales, Cox Automotive does not think COVID-19 will wreak long-term destruction on the economy in the same way that the 2007-09 financial crisis did.
Philip Nothard, Cox Automotive’s Customer Insight & Strategy Director comments: “Covid-19 has created a unique set of political, economic and social circumstances that will define a ‘new normal’. The automotive sector is very unlikely to return to what we knew before the pandemic but there are positives to be found.
“Our informed consensus is that we’ll see a ‘W’ shaped recovery* over the long-term, following the general path of the overall economy but with some notable deviations unique to our sector. Expect unusual things to happen with used prices as supply and demand imbalances work out.
“The new vehicle market will not return to any form of normality for some time. It will take time for manufacturers to restart operations, and we may never see output return to where it was pre-coronavirus for a while. The financial impact of Covid-19 will inevitably see some OEMs change their strategy, with some projects stopped altogether and others accelerated to respond to new consumer needs.
“We’ll also see consolidation amongst the dealer sector accelerate as liquidity issues take hold for some, and consumers switch to digital channels far more quickly than was otherwise anticipated. Used vehicles will be the dominant revenue opportunity for dealers and OEMs for the remainder of the year.
“Looking further ahead, we believe we’ll see several factors having a bigger impact upon the sector including the clean air agenda, remote working and mobility. All will influence how consumers choose and use their vehicles.”
“We will continue to support our manufacturer, fleet and dealer customers as they navigate their roads to recovery and evolve our analysis as new insights come to the fore in the coming months.”
A W-shaped recovery is when an economy passes through a recession into recovery and then immediately turns down into another recession. When charted, major economic performance indicators form the shape of a letter "W". Alternative recovery models include ‘L’, ‘U’ and ‘V’.