The Cox Automotive Insight Report 2020 has urged car retailers to respond rapidly and plan for the ‘short-term’ in a bid to achieve success amid the current trading climates various headwinds.
In a wide-ranging, wholly digital format for its third annual publication, the report drew on dealer sentiment and analysis of the recovery from the 2007 recession to help deliver insight and offer insight on the road ahead for retailers.
Compiled by Cox Automotive and its insight and strategy director, and Philip Nothard, along with input from Owen Edwards, associate director at Grant Thornton UK LLP, it created three possible scenarios for the future of Brexit negotiations and the success of Government’s Road to Zero to deliver its conclusions.
Edwards said: “The automotive industry is undergoing significant development. To maintain viability, it is critical to create a business strategy that embraces evolution. It is difficult to plan for the unexpected, so dealers should conserve cash where possible and focus on a three-month rolling plan for immediate impact.
“Longer-term, businesses need to ensure their strategy allows them to evolve with the market.”
Nothard said: “Dealers need to understand the conditions that underpin industry transformation, prepare for the large-scale changes which are affecting the industry today; and have a contingency in place to deal with potential future challenges.
“Data is essential, and businesses which are to remain viable need to understand consumer behaviour when it comes to driving technology adoption.”
Key market dynamics identified in the Cox report – which counted the National Franchised Dealers Association (NFDA) and Lexus Nexus among its other contributors – include low emission motoring, innovative vehicle finance models, digital retail and connected technology.
The report also explores market consolidation and agency models and the impact of COVID-19.
Forecasting models
In creating its forecasts for both new and used car sales in 2020 and 2021, the Cox Insight Report modelled three scenarios, taking into account a number of variables set to impact the market.
Its worst-case scenario (unlikely) is based on heavy tariffs resulting from a ‘no deal’ Brexit, weakened Sterling and the continuation of significant disruption from COVID-19 long into 2021.
The mid-case scenario (likely) assumes relatively low consumer confidence, ongoing increases in indebtedness, rising unemployment, and cash weakness, while a best-case scenario (unlikely) models no significant tariffs, a soft Brexit, ongoing support from the UK government, and no ongoing fall-out from COVID-19.
Based on new car registration data from the past decade, a comparative analysis of the recovery post-2007/08, and integrating the trends in demand for private over public transport, the Insight Report projected 2.02m new car registrations as the most likely scenario for 2021 – a fall of 12.8% against the 2001-2019 average.
The SMMT projection for new car registrations in 2021 is marginally lower, at 2.001m, revised down in the October 2020 Outlook.
In the used car sector, the mid-case scenario led to a 6.64m transaction prediction.
By the end of September, used car transactions were down 17.5% year-on-year according to the SMMT (2020).
Sue Robinson, the chief executive of the NFDA, acknowledged that there were many variables at play, however. She said: “A healthy relationship between dealers and manufacturers is vital, particularly as we respond to the impacts of COVID-19, Brexit and recessionary economic trends.
“It is imperative they retain an open channel of communication to discuss the main issues affecting businesses and continue to cooperate to allow the automotive sector to thrive through this period of changes and challenges.”
To view the free interactive report, visit: https://coxauto.co.uk/insightreport
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