The new car market’s loss will be the used car market’s gain
The latest figures from the SMMT (Society of Motor Manufacturers and Traders) show that new car transactions dropped 22% year-on-year in August 2021. But despite this drop, our Commercial Director Ian Plummer believes there are still reasons to be confident in the market and that the shortfall in new car registrations presents a huge opportunity for the used car market. Here’s what he had to say.
The pre-plate change holiday month of August is typically the quietist month of the year for new car sales so these low numbers have little significance on the broader health of the new car market. What’s far more significant is the outlook for September, and whether the uptake for the biannual number plate change will be enough to sustain the market during the leaner months ahead, particularly during the run up to Christmas and the new year.
On the surface, all our demand-side metrics are pointing towards a very positive September; not only have we seen the largest August on record for the number of cross platform visits to the Auto Trader marketplace (70.2 million), but the number of new car leads sent to retailers hit an all-time record in August proving that there are certainly plenty of car buyers hunting their next new car. However, while this may well help to build retailer order banks for future deliveries, the frustrating reality is that it’s likely the September market will fall well short of matching this strong demand with enough new car supply due to the ongoing global shortage of semi-conductors.
In fact, based on the levels of demand we’re observing we believe the market had the potential to reach 2.4 million new car sales this year, but such is the impact of the shortage, we predict it’ll now fall considerably below the 2 million mark. However, our research suggests the new car market’s loss will be the used car market’s gain, with three quarters of car buyers indicating they’d switch to a second-hand alternative if their brand-new choice wasn’t available. This could see an additional 200,000 to 300,000 would-be new car buyers entering an already record performing used car market.
It’s reassuring to see the continuing positive trend of plug-in electric vehicle penetration, which is also reflected on our marketplace, where one in seven new car advert views are now for an EV. However, despite strong progress in terms of consumer interest, product choice, exciting new models and increasingly intense marketing activity, our analysis shows that we remain behind where we need to be to meet the government’s ambitious, albeit admirable, 2030 targets. For EVs to be a truly viable option for the mainstream, we’ll need more incentives to deal with the prohibitive upfront cost for all but the most affluent consumer; more investment to get over anxieties around infrastructure; and more information to help car buyers navigate the complexity of what is an entirely new segment of the automotive industry.