Following a period when the UK automotive sector has been making headline national news, thanks to sudden Government policy shifts and overseas investors tussling over one of the country's biggest motor retailers, industry veteran Suzuki GB director Dale Wyatt shared his thoughts and a direct plea for modern automotive retail leaders to rethink their plans in changing conditions.
I have been reflecting on the automotive news and macro events of the last fortnight…
Firstly as an industry we are in pretty good shape. The UK automotive sector is vibrant profitable and investable. This is evidenced by the major OEMs and component factory investment commitments made recently.Furthermore overseas buyers are actively seeking to acquire the remaining UK automotive PLCs.
In addition the PLCs and regional groups are picking off the best owner drivers with an eye on (a) The premium brand franchise outliers and (b) strategic multi brand opportunities.
The question is, where does this leave the traditional owner driver?
The big news this week was the UK government u-turn on its green pledges. I think this will be the first of many policy changes as the government sets its stall out for a general election.
Irrespective of your view about the decision, the announcement will reduce consumer EV demand and as if to rub salt in the wound I read that the 2024 ZEV mandated 22% EV ratio is still in play? The narrative will discourage buyers and the legislation will penalise OEMs.
Actions have consequences and the EV near future (next 5 years) outlook now looks cloudy. I predict that OEMs will pause and reconsider the EV and ICE midterm (5 -10 years ) product plan.
Turning to the here and now I fear that with significant inventory arriving an EV price war is inevitable and I think we could see an ICE vehicle shortage in Q1 I suspect that over the coming months EV margins will be squeezed and in order to compensate the ICE future production mix will once again be increased and skewed towards large SUVs.
In other news Interest rate rises have paused for now as inflation reduces, unemployment increases and the housing market slows. It is becoming clear that we are at a tipping point.Trading conditions could get tougher in q4 as Christmas looms and the summer holiday credit bills bite.
Used car supply (especially 3-5 year) will be challenging and sourcing inventory will be a major headache for the big used car businesses. The long tail of outstanding new vehicle orders is looking shorter with some examples of unsold inventory on the ground available for immediate delivery. Retail buyers are proving to be an elusive commodity and corporate buyers have replenished their fleets. So we are moving back to a “new normal” trading environment with winners and losers.
The market conditions will punish inactivity and (with a push and a shove) reward those that take action. The winners will create a plan that will counteract the change in the conditions.
So the question is what is the plan? And what are the elements that need to come together for the winning plan to materialise?
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