WITH 2018 consigned to the history books it is important to remember that the industry learnt some interesting lessons during the course of the year.
Rupert Pontin, Director of Valuations at Cazana.com said new car registrations were down by 6.8%, almost exactly in line with Cazana’s predictions, and used car sales down by 2.1%.
He said: “Key events seem to have crashed into the market one after the other and each one presented a fresh set of problems. From GDPR to WLTP and the often overwhelmingly misinformed debate on new diesel car emissions, there was always an opportunity for both discussion and a fresh approach at improving profit.
“Such rapid market changes highlighted the importance of quality insight and data provided from observations across the whole market taken from realtime sources and not historical data.
“Just three years ago many businesses were happy to accept that with a growing new car market and strong used car market, their own historical performance data was adequate on which to base commercial strategy which is by no means acceptable in today’s more complex market.”
Pontin said that behind just about every key market changing event has been a controversial government decision or intervention that has been either unjustified or often inexplicable.
Cazana sees a long and slow recovery period ahead. Pontin said: “This is not a positive outlook for the coming months but it is a reality with which the automotive sector and more importantly the country must deal with.
“Economic growth in the UK has been downgraded too although it is fair to note that there is a similar picture in Europe, albeit less severe, and that is most certainly a reflection of the Brexit position which has damaged the automotive sector .
“Whether we leave with a deal or not there will be a period of balance and the country as a whole will need to understand what our new trading arrangements will be with Europe. This will mean that some products may become less readily available and changing tariffs will mean pricing will alter. This may significantly affect the automotive sector for some new cars.”
There are signs that key European manufacturers are already trying to stockpile some vehicles in the UK to avoid higher prices. The VW Group has been cited as being ready to increase new vehicle pricing (except for Audi) from the day after Brexit, passing costs to the consumer.
Pontin said: “This will be interesting as some German manufacturers have a very large export market in the UK and changing tariffs may mean that altered pricing will see a greater uptake in the UK of home-produced models.
“This would mean a strange flex in supply and demand that may have long term industry affects particularly on the used market.”
New vehicle supply is still being affected by the introduction of the new WLTP standard in 2018 and will evolve further during the course of 2019. While many OEM’s tried to deal with this in 2018 there are still issues with some which is manifesting itself by lack of new car supply.
Pontin added that given volume production constraints, economic concerns coupled with Brexit and the likely performance of the European new car market this year’s UK new car market is likely to produce registration volumes some 1.8% lower than in 2018 in Cazana’s opinion.
He said the the used car market will be the focus for many of the dealers this year as consumers seek to spend a little less money and this will be in part facilitated by better used car finance propositions.
“There are already a number of finance providers seeking to offer more innovative used car funding propositions. The interesting point here is that long- standing finance providers are seemingly moving a little slower and more cautiously than newcomers to the market.
“This is in part due to their business size but also the newer entrants to the market are using more and better data sources to help with more realistic RV setting resulting in more opportunities to do business driven by realistic deals based on better more accurate GFV’s.
“The use of retail-based data is key here to help understand what the future value of a car will be and data science is helping by providing fact-based insight untainted by subjectivity.”
Greater activity in the used car market combined with a lower volume of stock coming from the wholesale environment as a result of lower registrations in recent years will bring some challenges too.
The last two years have seen some real strength in used car pricing driven by retail consumer demand and the transparency that the internet has provided potential buyers has resulted in an acceleration of the change in which wholesale buyers not only search for but also price and source their used vehicles.
Working from Retail price back is not a new thing but has become very much more prevalent in the last 12 months and getting the right data to support retail pricing and subsequent wholesale purchasing decisions is more important than ever.
Pontin said: “There are many ways to retail a car these days and dealers will continue to be more innovative in bringing the cost of retailing down and improving their profit margin.
“Having market-wide data that will facilitate profitable trading based on a comprehensive set of market-wide KPI’s will be more fruitful than just seeking the lowest retail price and racing for the bottom of the market. With used car supply constraints already evident this has already proven to be counter-productive.”
The speed with which hybrid technology is improving is impressive although some OEM’s have rushed to get short-range offerings to the new car buyer that will have little appeal when they hit the used market, said Pontin.
Clarity from the government on taxation and infrastructure support will greatly help adoption and the new sales figures whilst also consolidating the demand for used variants.
Pontin added that some of the major cities have taken a bit of a step backwards away from somewhat controversial emission charge ideas but this has been partly driven by the greater understanding of the effect these charges would have on local constituents and their voting patterns.
He said that 2019 will also see the further development of mobility packages for consumers.
“The idea that a customer will buy a package charged on a monthly basis giving access to various different types of transport is perhaps a little further away than we might have been led to believe at the beginning of last year.
“There are a number of companies that have been working on this type of solution but as yet monthly rates have been a little prohibitive and the concept, whilst laudable has yet to gain mainstream adoption by the consumer.”
Pontin believes the diesel discussion will rumble on during 2019. With plenty of used car demand, the new car buyers will eventually realise that Euro 6 engines are not as bad as the national press may have them think.
“Equally for higher mileage drivers diesel is still a very cost effective and responsible way to travel and until Electric Vehicles have a consistent 350-mile useable range they will not make a dynamic impact on the market.
“Secondly, 2019 will have a focus on the sale of multi-driver vehicles. There is growing concern over how the ASA and the courts are handling complaints raised by consumers who believe they were mis- sold their used car.
“The fact that many consumers seem to believe that a multi-driver vehicle owned by a company is worth less than a privately-owned car is part of the issue. However, condition and history of a car are far more likely to be the price influencer and the way in which a multi-driver car is looked after is arguably more comprehensive and detailed than that of a single driver privately owned vehicle.”