Is 2023 the year the market returns to “normal”? An interview with Peter Smyth of Swansway Motor Group

Are we going to see the market “normalise”? Will new car supply increase? What’s in store for the EV market in 2023? These are just some of the questions that we put to Peter Smyth, Director at Swansway Group who shared his views on the year ahead with us.

Discover what he had to say below and be sure to watch the clip below which features a Q&A with our COO Catherine Faiers from this week’s webinar.

Question: Now we’re a few weeks into the new year, what were your key takeaways from 2022? What do you want to hang on to from last year and which bits would you rather forget happened or never see again?

Peter: There isn’t much that I’d like to forget about 2022, it was a very good year for us. We sold more cars at a greater margin than ever before which made last year the second-best year we’ve had in our history.

A key takeaway for 2022 was new car margins, restricted supply meant that they were very strong, it would be great if we could continue with this in 2023.

Used car margins were also very strong in 2021 and 2022. Although we're not seeing margins quite as strong in 2023, they're still reasonably healthy.

However, the two biggest issues that we’re currently facing as we move into 2023 are staff shortages and sourcing good used car stock. Availability of stock, particularly in some of these age cohorts that are now being constrained from a very weak new car supply market is a consistent theme for more retailers.

Question: January is often a big month for retailers, what activity do you have live at the moment? How have you set your business up for success in 2023?

Peter: Towards the end of 2022, there was a lot of bad news around interest rates, cost of living increases and the Ukraine war. This started to mould our thinking as we thought that as a business we would start receiving fewer enquiries. A big opportunity for us has therefore been focusing on converting our enquiries through putting the customer at the heart of our business and nurturing all of the leads that we do receive. Another challenge we are facing as a business is sourcing stock and the right price.

Question: 2022 was a robust year for the used car market and whilst new car volumes were low, margins were strong. How are you thinking about 2023 overall, what do you think some of the big opportunities and challenges for retailers will be?

Peter: It is early days with it only being January, but so far it is looking to be a good year.

I think the major challenge for 2023 is going to be used car stock supply. The lack of new car stock in 2022 led to fewer people selling or part-exchanging their cars, which has meant a shortage in the used car market. We’ve also seen that the longer lead times on new cars have given buyers a long time to dispose of their previous car. So those part exchanges aren't necessarily coming back to us. I can see this continuing into 2023 and proving to be a challenge.

But I do think there are going to be opportunities in the new car market. We are starting to see more stock coming through. If you see some of our more premium brands, their new car volumes are almost back to normal...whatever normal is nowadays. There will be opportunities there because there's a fair old order bank built up that we need to fulfil. The additional volume of new cars should allow us to take more part exchanges in, which will benefit our used car divisions and hopefully ease the used car supply issues. So that is going to be a massive positive.

There is another positive that you've got to look at, and it's particularly more from a franchise perspective. All cars now have the ability to connect to the OEMs mainframe which will give you invaluable information, particularly about service and maintenance.  For example, if the service light is due to come on you can contact the customer in advance and invite them to book in. I think that there's a massive opportunity to further engage with car owners there that we shouldn't let slip through our fingers.

Question: There’s been speculation in the last few days that new car supply could return quite strongly this year. What are you expecting in terms of new car supply and how do you think this will impact the used market?

Peter: I can see the new car supply returning to pre-pandemic levels and being deemed strong, but it will take some time for these cars to filter into the used car system. If the supply does start to increase, I expect to see the OEMs approach daily rental companies. This would help the supply of late used cars, but there will be a 6 month time lag.

I think it'll take a little bit of time. I mean, personally, and I know that it probably won't happen, but I wouldn't really want new car available to be at pre-pandemic levels. I would like to always have just one car less than the actual demand, that's obviously the perfect situation and that's when you tend to make margin. I think that it will filter through, but it will take a further 12 to 18 months for the used car market to see the benefits. OEMs will be able to sell to contract hire and leasing companies on a larger scale again and these cars will then filter through into the used car market.

Question: Tesla has hit the headlines with big price reductions which have dented confidence in the EV market for some. Do you have many used EVs in stock and how are you feeling about the opportunity for the used EV market in 2023?

Peter: We do have a range of EVs in our stock and several of the manufacturers we represent have good, strong EV models available. It’s going to be a very rocky road for EV values, because although it is a new technology, it doesn’t save the customer time or money, or make it more convenient for them. Electrification is basically led by environmental issues and government policy, but they will eventually find their level.

Where we are seeing the difficulties is in the used EV market at our non-franchise retailers. There is a bit of a mixed message on new EVs against used EVs that has been part-exchanged. There is also huge uncertainty in the EV market, not caused by Tesla price reductions, but their recent price reductions haven’t helped. The fact is, as a used car they are just too dear.

Question: Coming back to the year overall and the used car market. Do you think used car transactions overall will be higher this year than last year and closer to pre-pandemic levels? How are you feeling about where the year will end?

 Peter: Used car transactions will not be higher than last year. There is a lack of physical vehicles in the market right now, over 2 million units less actually. But that being said, if January is anything to go by then we are hoping for a decent year in terms of profitability. 

Question: Finally, given your huge experience in the industry, you must have seen almost everything the used car market can throw at retailers, what’s your top tip for success for retailers in 2023?

Peter: My top tips for success that I would give to anyone whether they be a Head of Business, Brand Manager or Sales Manager and at a franchised dealer or non-franchised dealer, is to have the discipline to run a stock list every day. Of all of your inventory and go through it every single day in order of days in stock. I’d also tell you to follow these simple steps:

1.    Price to the market from day one.

2.    Address your aged units immediately with aged being classed as anything at 45+ days in stock. Then address the pricing daily until sold.

3.    All stock that you don’t want to retail but do want to dispose of, do so within 10 days.

4.    If you are not experienced in the used vehicle market, be very wary about investing in it!

A Q&A with our COO Catherine Faiers

Following a brief interruption from an unexpected fire alarm, Catherine sat down with Stuart Leatherbarrow to answer some of your questions about the market and our plans here at Auto Trader. You can catch a clip of her Q&A below or you can watch the webinar which includes our interview with Peter Smyth and Catherine by clicking here.