An update from our CEO Nathan Coe
Speaking to many of you and looking at our data, it’s clear the strong momentum we saw at the start of the year is continuing. Consumer demand, speed of sale and pricing are all trending positively. Whilst 2023 is going to be another year of change for the industry, this will create both opportunities and challenges for all of us. I want to touch on two of them here – supply dynamics and electrification and how we are working to support you in responding.
The Retail Market is in good health.
Retail performance this year has been strong. We are not seeing concerns over consumer confidence play out in our data. We’ve seen huge demand on Auto Trader including two record-breaking months at the start of the year with visits up over 15% on last year, rising to 20% March to date, and well ahead of pre-pandemic levels. January was our largest audience month ever, with 80 million visits [1]. Buyers visiting us are feeling more confident, over 85% are at least as confident as last year in being able to afford their next car and we continue to see over three out of four visitors looking to purchase a car in the next 6 months [2]. Adding to that reassuring picture is the latest update from the OBR who now forecast that the UK will not enter a recession this year.
However, supply does remain constrained, down 11% in comparison to last February, with March showing similar levels of supply so far, which presents challenges for retailers [3]. This dynamic of strong demand and constrained supply does mean that cars are selling quickly, selling on average every 28 days in March, which is slightly slower than the near record 25 days in February, but matches March 2022, and is faster than pre-pandemic levels [4]. This is against a strong pricing backdrop. As of mid-March, average prices have increased 2.3% year-on-year, which is up on the 1.3% growth recorded in February. It marks the first acceleration in price growth in 10 months. At a month-on-month level, March to date is up 0.7% on February’s average prices. It’s the third consecutive MoM increase and is well ahead of the pre-pandemic average -0.4% MoM contraction recorded in March between 2011 and 2019 [5].
Crucially, these strong signs of car buying intent are flowing through to transactions with the market up 7% in January, 5% in February and 6% so far in March when compared last year, according to our proxy sold data.
Sourcing will be key to retailer success.
It’s clear that retailers who sourced confidently over the Christmas period are seeing the rewards of that given the market conditions, whereas those who were more hesitant have struggled to keep up with the pace of the market.
One of the good things about the used car market is that we can track new registrations and see what the used car parc will look like in future. We’re currently seeing the impact of 3 years of a weak new car market which means the car parc of used vehicles aged 0 – 5 years has shrunk by 27% [6].
This creates a real need for retailers to consider diversifying into older stock and to seek out new ways to source stock. The data shows that where there is stock, there are sales: 5-year-old and over car sales grew by 23% in the last quarter of 2022 as stock of that age cohort grew 15%. Conversely by the same comparison, the 1–3-year-old cohort saw stock volumes down 22% and sales following, down 24% [7]. Those who have adapted sourcing strategies are thriving and making the most of the market. So, explore all avenues available to you when sourcing stock, including looking at both private and trade stock via Dealer Auction. Furthermore, if you have cars available for sale, make sure they are all on Auto Trader as quickly as possible so you maximise your chance of a sale at a good margin.
As always, data can inform your decisions around what stock to buy, for what price and how to then price that stock to the live market. Our tools provide you with powerful retail metrics to show which vehicles should be attractive to source, looking at supply, demand and predicted days to sell.
2023 is the year electric becomes mainstream.
If supply is the challenge facing the industry right now, electrification is the next big force of change which is creeping up faster than many realise. Our data shows that only 11% of independent retailers stocked an EV last year. The EV market is immature and future dynamics are harder to predict with influencing factors such as government policy changes, energy costs, influxes in supply and OEM pricing decisions.
Despite the negative headlines, consumer demand for EVs is strong and up around 50% year on year with a steady growth curve over the last few years. The big market shift has been on the supply side where we’ve seen a 260% increase in the supply of used EVs over the last 12 months [8] as a result of OEMs prioritising EV production during the pandemic. This is huge and will take a very significant demand-side stimulus or incentive to keep up.
So, supply and demand aren’t in balance right now and that is being reflected in price. However, it’s not the case for all EVs. There are pockets of EVs where demand is ahead of the market overall and where we see opportunity. So I would encourage you to use our Market Insight tool and the data you have access to, to work out where and how to play in the EV space. There are always pockets of opportunity to be found.
If you don’t feel fully up to speed on all things electric yet, a good place to start is our new RPM module on retailing electric vehicles. We’re also continuing to drive the conversation and inform consumers through our Electric Hub, monthly EV giveaways, EV reviews on our YouTube channel and through showcasing the latest electric cars on our social channels. We're also increasing our work with media and influencers on the benefits of EVs to bring greater social proof through a variety of voices.
In addition to this we are actively lobbying government to drive the conversation around affordability to enable more mass-market access to EVs, including tax incentives for used BEVs, aligning public charging rates to those of private charging costs and providing battery health clarity to both retailers and consumers through common standards.
As always, the market continues to change and you can count on us to evolve with it, with you and for you. If you’ve found this content useful, there is more information and visualisations of the data in this 2023 forces of change whitepaper which we’ve just released. If there’s more we can be doing to support you as you navigate this next wave of change, then please do not hesitate to get in touch.
Sources
1 Auto Trader Cross-platform visits, March YoY data up to the 15th
2 Auto Trader onsite survey, March 2023 n=226
3 Auto Trader internal data
4 Auto Trader internal data, comparison to average of 29 days to sell in March 2019
5 Auto Trader Retail Price Index, March data up to 18th March.
6 SMMT & Auto Trader forecast
7 SMMT and Auto Trader internal data Q4 2022 vs Q4 2019
8 Auto Trader internal data, demand +48.4%, supply up 261.4%
