EU trade agreement and consumer habits shift could stall Q4

Cox Automotive has warned car retailers to brace themselves for a tough September and Q4 as the new EU trade agreement, a logistics “wages war” and evolving consumer habits present further uncertainty.

Philip Nothard, strategy and insight director at Cox Automotive, has already warned that the semiconductor supply shortages hampering car production could last into 2022.

Now he believes a new series of market forces are about to impact the sector.

Cox is warning that the end of the furlough period on September 30, together with a widespread change in consumer spending habits, the impact of Brexit, and a wage war within the logistics sector, will continue to negatively impact used vehicle supply, availability, and delivery.

And it said the COVID-19 pandemic had masked the true impact of the new EU-UK Trade and Cooperation Agreement following Brexit, where manufacturers and suppliers adapt to the new arrangements and an imminent 'wage war' in the logistics sector.

Nothard said: “The new TCA rules bring fresh concerns of rising delays and increased costs of vehicles entering the UK.

“The UK Government needs to ensure that the UK automotive industry is high on the priority for vehicle supplies from manufacturers.”

Yesterday’s H1 2021 used car sales data from the Society of Motor Manufacturers and Traders (SMMT) demonstrated some of the challenges that car retailers are having in sourcing stock for their forecourts.

While the sector delivered its most successful Q2 ever, rising 108.6% to 2.17 million sales, limited stock availability resulted in the oldest profile of sold cars on record, with just 12.7% of vehicles sold being three years or under.

Today (August 11) Cox reported that used car values continued to rise across Manheim’s auctions during July, growing 2.7% month-on-month to £6,124.

At the same time the average mileage of cars sold increased by 2.2% to 69,685 miles, the average age increased by 1.9% to 102.9 months and CAP clean values fell by 1.2% at 98.9%, all month-on-month.

Additionally, first-time conversions were up 2.2% month-on-month at 83.3%, Cox said.

Nothard said: “To navigate the current headwinds, used car dealers are having to lean on all their experience, knowledge and data.

“A recent Cox Automotive dealer sentiment survey revealed that 81% of dealers have increased the proportion of part-exchanges they retain for retail.

“This is further impacting wholesale supply and driving competition for the stock that’s available.

“Moreover, two-fifths (41%) expect this change to continue even when supply improves, suggesting that some dealers’ habits have changed permanently.”