An update from our CEO
I hope that you, your family and colleagues are well and have had a productive first half of the year. It’s been quite a summer so far with a new government, The European Championships and different dynamics playing out in the market. As ever, I hope this update is useful to help you stay informed on the key topics impacting your business and to share how we can support your performance.
Used and new markets perform differently, requiring insight over instinct
The new and used car markets are being impacted by very different dynamics, so it’s best that I talk to both separately.
Used stock is in high demand, but must be advertised online
In the used car market, we’ve seen robust market conditions throughout the first half of the year, boosted by improving consumer confidence as inflation continues to fall and unemployment remains low. That’s led to strong levels of demand, with June marking the biggest increase in consumer engagement in 15 months and July up 2.2% so far. Supply, however, remains constrained particularly at the younger end of the market in 1–5-year-old vehicles. With reduced supply in the market, use Market Insight to identify pockets of opportunity when sourcing and Retail Check to maximise the margin on your existing stock, ensuring it’s advertised online and priced to market. We know that 2 in 3 buyers only visit Auto Trader in their car buying journey, this means that stock not advertised with us is invisible to around 7 million unique consumers each month. Despite the challenges around sourcing, the market is healthy, transactions are up, vehicles are selling fast and we’re seeing pricing stable and back in line with seasonal norms. All of this means retailers can be confident pricing to the live retail market which continues to drive strong stock turn.
New car demand supported by new marketing campaign
Despite robust consumer activity on Auto Trader, sales of new cars to private buyers remain weak, with retail registrations back 12% year on year. A big factor driving this is cost, with the average price of a new car up 35% in the last five years, compounded by the high cost of borrowing. Manufacturers also have a big challenge ahead to hit the Zero Emissions targets by the end of the year and increasing their electric sales is a huge priority for many, so overall we are seeing supply return, bigger discounts and increased media spend to stimulate demand from private buyers. We’ve seen strong tactical offers in the market and in many cases these do stimulate demand, whilst brand spend on TV was up 66% versus 2023 and is the highest it’s been for 5 years.
So, what does this market context mean for retailers? Well, the Auto Trader new car audience is slightly ahead of 2023 and new car ad views are up by almost 20%, hopefully a signal of more buyer activity as we go into September. We’ll be looking to boost this audience further with a multi-million-pound campaign set to go live in just a few weeks, to further support consumer demand for new cars on Auto Trader.
To get the most out of every opportunity, if you do have a new car package, you should make sure you have all your stock advertised and that you're making use of all the merchandising techniques available to you on Auto Trader. For more details on how to make your new car stock work harder for you, contact your AM or watch this masterclass.
What the second half of the year has in store
Given these market dynamics, the most pertinent question is probably what we can expect from the second half of the year and where retailers should focus. Market Health has been steadily improving through the year as demand is healthy and supply remains constrained. Consumer confidence feels robust and inflation is cooling. Based on the current trajectory we’re expecting to hit 7.6 million used car sales by the end of 2024, a 5% growth on last year.
We believe there will be four key areas which will determine how successful the second half of the year will be for retailers:
Sourcing stock – the squeeze on 1-3 and 3–5-year-old vehicles will force many retailers to mix up their sourcing strategy. Use Market Insight to identify pockets of opportunity and consider new channels or new partners to unlock profitable stock, using data to inform what to buy and how much to pay.
Stimulating demand for new EVs – manufacturers are facing pressure from the ZEV mandate, so we can expect to see more push activity through fleet channels, more consumer offers, and more pre-reg to stimulate demand. For retailers, advertising your new stock on Auto Trader, with any discounts highlighted will mean it’s for sale and visible to buyers. There will be competition, so you need to be marketing well.
Pricing of nearly new – Oversupply of nearly new cars, especially EVs, will increase with struggling retail new car demand. This is likely to put pressure on speed of sale and pricing. If you’re bringing in nearly new stock, it comes back to using data to set a target buy price appropriate for the retail market and buying stock with good retail demand; using Retail Rating as your guide.
Drive Margin – Trade valuations are stabilising yet we’re still seeing many vehicles enter the retail market below current valuations, so one clear action retailers can take is to price to the retail valuation from day one and utilise data to guide in-life pricing decisions.
Will supply ever be the same?
The last point I want to cover is around the changing shape of the UK car parc, and the implications for the market. The huge drop in new car sales since 2020 will have a lasting impact on the cars flowing through to the car parc. We’re already seeing 28% fewer sub-five-year-old cars on the road today than in 2019, while the number of cars aged 5-10 has increased by 20%. Brands were impacted by COVID and chip shortages differently, but most will have far fewer sub-five-year-old cars in the parc by the end of this year, some by more than 50%. Coupled with the transition to electric, and the emergence of new brands, it’s safe to say supply will never be the same again. Such significant change in both the car parc and on forecourts, means sourcing, pricing and selling cars will be ever more dependent on the right insights.
Marc Palmer, our Head of Strategy & Insights will talk through our expectations for the second half of the year, including our latest supply analysis and what it means for you on our next webinar, tomorrow at 9:30am. You can download the data pack to dive into the detailed trends and sign up below.
Supporting you to stay ahead
Our aim is to provide you with the tools, data and insight to stay ahead and understand the market so you can make the best decisions for your business. Our regular insight webinars are well attended and are an easy way to digest our unique view of the market. The topics are set by you and we’re hearing that vehicle preparation is an ongoing challenge, so on 7th August, Marc Thornborough will be joined by Craig Vladimirovs from Car Quay and Ben Dewar from Redgate Lodge as they share their experience alongside our data on how vehicle preparation impacts speed of sale. It's set to be packed full of insights and ideas to take back to your business, so please sign up below.
If you ever need any help in understanding how our tools can help you succeed, please reach out to your Account Manager or call us on 0345 111 0002.
As always if you have any feedback or anything you’d like to discuss with me, please contact me directly at Nathan.coe@autotrader.co.uk
All the best,
Nathan.
