Cox Automotive warns of ‘significant disruption’ in months ahead

Cox Automotive is urging caution with significant disruption expected in the next few months with new car supply issues.

It said new car registrations across Europe continues to struggle to find a way out of the pandemic, and there are challenges faced from the supply.

Compared to April 2019, the UK’s figures were the least concerning but still represented a 12% decline. Italy (-17%), France (-25%), Germany (-26%) and Spain (-34%) all suffered double-digit declines compared to April 2019.

Philip Nothard, Cox Automotive insight and strategy director, said: “The latest UK data for new car sales aligns to our most recent forecast. Showroom reopenings and the easing of lockdown restrictions delivered a vital boost. Still, retailers need to remain vigilant in the months to come and not be blindsided by this early optimism.

“The new car market is undergoing some of the most severe raw material shortages for decades, with semiconductors, aluminium and rubber at a premium. Manufacturers are reporting real challenges with some forced to halt production and others considerably slowing down volumes. This could have a more significant impact on the vehicle retail sector than Coronavirus itself.

Northard warned that shortages in the new car market will inevitably impact the used sector.

“With new-car supply limping, there will be fewer part-exchanges available for dealers to take advantage of, triggering a reduced supply of used cars into the market. Furthermore, fewer cars will go into fleet channels, affecting de-fleeting and will continue to affect used supply. These challenges could well leave the market reeling until deep into 2022.”

Nothard suggests there are several actions that vehicle retailers can take to mitigate these fluctuations in supply and demand. He refers to a wholesale to retail lag and urges dealerships not to be afraid to alter their prices to reflect the market situation.

“While we’ve had a great short-term boost to vehicle retail, dealers should not expect supplies of either new or used stock in great numbers any time soon. This means that maximising profitability is critical. The sector mustn’t be afraid to raise prices to counter the effects of supply disruption. Pricing to the strength of the market rather than looking simply at the profit margins on each car will put dealers in a strong position to ride out this difficult period.”