‘Volatility’ to define 2022 car retail sector, says Cox Automotive

Cox Automotive has said that “volatility” is set to define the car retail sector in 2022 as stuttering car supplies combine with rising inflation and changes to OEM and consumer relationships.

The vehicle remarketing and automotive retail services specialist said that ‘VUCA’ – an acronym that stands for volatility, uncertainty, complexity, and ambiguity – will become a commonly-heart term in a year that will deliver challenges to new and used car dealers.

Echoing sentiments made by Society of Motor Manufacturers and Traders (SMMT) chief executive Mike Hawes following publication of 2021’s full-year new car registrations data, Cox has suggested there is no return to a pre-COVID trading climate in sight.

“VUCA is used to describe the situation of constant, unpredictable change that is now the norm throughout several industries as businesses gear up for a new year that continues to provide challenges to all organisations,” Cox said in a statement published today.

“In our view, we will have to get used to a VUCA trading climate for some time yet. As an industry, we must think beyond the traditional and embrace it as there is no quick fix back to previous normality. Given the industry’s outlook in a post-pandemic world, we expect VUCA to continue.”

AM's recent Outlook 2022 car dealer survey conducted in partnership with JudgeService, showed that car retailers were looking ahead to this year with uncertainty, but the National Franchised Dealers Association (NFDA) highlighted that there was "cause for optimism".

Cox highlighted the November 2021 Consumer price inflation report published by the Office for National Statistics which stated that the largest upward in contributions to that month’s CPIH 12-month inflation rate at 1.34ppts came from transport.

The report not only coincided with the highest ever average UK petrol price at 145.8 pence per litre – compared to 112.6ppl a year earlier – but an increase in the contribution from second-hand cars from 0.01ppts in April 2021 to 0.32ppts by November 2021.

Cox Automotive’s insight and strategy director, Philip Nothard, said that the post-pandemic era had seen car retail businesses forced to acclimatise to a new norm where “making a profit in Q1 and then focusing on maintaining profit in Q2 and H2” was no longer a fixed trend.

The new normal for 2022 is likely to centre around retailers’ focus on margin retention and profit, he added, stating: “Over the past two years since coronavirus first took hold, dealers have learned new ways to derive a profit from retailing vehicles, and many have shown they can hold their margins even with increased values in the wholesale market.

“There are also opportunities to make money even outside of normal trade values. These lessons hold many retailers in good stead, regardless of what 2022 throws at the industry.

“The advice of Cox Automotive is to adapt to VUCA and embrace change.

“The expected rise in energy bills will continue to hit disposable incomes, there remains no end in sight to inflation, we will experience further digitisation of retail and digitally assisted sales, changes in the way OEMs retail new and used cars are accelerating, a rise of subscription/mobility products is imminent, and we will continue to shift to EVs as the year 2030 nears.

“To adapt to this, businesses must be resilient, continue to price cars correctly, market them properly, image and promote them properly, and make the best of the new norm. That way, their products will remain attractive to consumers, despite changing market forces in the background.”