April COVID-19 Webinar

We’re now half way through April, with showrooms reopening for the first time this year and fresh optimism in the air.
In this webinar our team of experts reported back on the latest findings and looked at some of the economic indicators focussed on our industry.

As the economy gradually reopened over the course of 2020, we saw this fall back, but only by around 5%, and the winter 2020-21 lockdown has clearly provided another stimulus to online, with share rising again to a record level of 36.1% in February 2021.

Online shopping and home delivery are now so embedded for many consumers, coupled with continued working from home until July and the closure of several big-name high street stores, we would expect online to command around a third of retail spending going forwards.

This obviously has implications for anyone operating or working in the home delivery sector and supplying vehicles to that sector.
UK households continue to make record levels of savings – which it is hoped will translate into a consumer boom during the remainder of the year.

Last year’s new car registrations ended at 1.63 million units, 680,000 units, almost 30% down on last year, but comparing month-on-month, March 2021 is almost 30,000 units above March 2020, which suggests some optimism for a recovery. The key question is which sector of the new car market is driving this?

Looking at fleet and business versus private, March fleet new registrations were much stronger than 2020’s – up 35,000 units. By comparison, the private market was down slightly on the previous March.

The LCV sector has been impacted very differently by COVID-19. New vehicle registrations for March are encouraging, but they are still down 11% on pre COVID levels of the same month.

The current year-to-date figures are positive when considering those pre-COVID years were dogged themselves with things such as the introduction of Euro 6, the EU referendum and WLTP. But for the rest of the year supply will be the main issue as we see continued lockdowns across Europe, semi-conductor supply issues and speculation that manufacturer order books are healthy

For LCVs, January & February were slow compared to previous years, however, prices being paid has not weakened. March sales almost matched the volumes seen in 2017.

Buyer activity is unrelenting, with more main agents buying used stock to satisfy the demand. With no indication of large swathes of new stock available, used vehicles that do reach the market will gain added interest.

In the used car sector sales rates have been the highest of any of the 3 lockdowns. Cars have been selling in the trade, albeit not to the same levels as they would if car showrooms had been open – 40,000 a week is a bit of a benchmark. Volumes increased throughout the first 2-months of lockdown 3, but have dipped in the last couple of weeks, although they were affected by bank holidays. For most of this time, conversion rates at auction have been increasing.

What we’ve seen in the retail market during the period since our last webinar are retail sales volumes improving as consumer acceptance of handling the whole transaction online continues to increase.

Some businesses achieved sales at over 90% of “normal”, although many car supermarkets were closer to the 50-60% mark. Some premium franchise dealers actually reported business levels ahead of where they would normally expect – many consumers remain active in making aspirational purchases with money saved or government backed funds received.

Retailers have now been working within the constraints of the pandemic for a full year and what is clear is how far they’ve improved their online presence and overall distance selling procedures. They’ve also had to work harder than ever to achieve the levels of sales and to handle the increased number of competitors – not just the traditional ones in their local area. This increased online competition was always on the horizon but has certainly accelerated over the last year.

In general, values have remained stable, Since February prices compared to cap have increased & last week sat just slightly above that benchmark figure.

As we predicted in our short-term forecasting product, values have increased but only by a small amount. In the run up to car showrooms reopening last June, values went up sharper and quicker. This year they have increased by 0.4% or an average of about £50 at 3-years old. Desirable, aspirational cars continue to increase by more than the average.

So, what happens next? Whilst it is a bit early to form a long-term judgement on what has happened since car showrooms opened, it has certainly led to a small, continued strengthening of values this week. Feedback from a variety of dealers has been positive and much of the buying journey remains online.

Supply levels are steady. There’s the potential for new car supply to continue to be hampered by semi-conductor shortages. This could lead to buyers turning to used cars rather than new, as well as a shortage of part-exchanges in the market. There are also many companies & individuals reviewing their decision to offer or take a company car – this could lead to more buyers in the used market.

Consumer demand is likely to stay strong for a while yet, but there are a variety of reasons why this will not last. The further we look to the future the picture improves once again, mainly because lower new car registrations in 2020/21 will result in reduced used car supply in future years.

We have just had a year when many vehicles have driven much less than usual or even just been sat on the drive and haven’t moved. Going forward, we also expect to see a reduction in miles driven as many transition to partial or total home working. Therefore, there will be a greater number of ‘low’ mileage cars in the marketplace.

You can get an in-depth view of our analysis on our webinar recording

April COVID-19 Webinar