What’s the true state of the automotive market and what that means for you?

 Plenty of attention has been given to the automotive retail market in recent months with some claims of declining demand, plummeting prices, and sparse supply painting a negative picture of our market. 

But is any of this true? 

In our latest blog, we answer this exact question by sharing our analysis of the current retail market. 

Demand is on the rise – even for EVs

The market today is completely different from the one back in 2019 i.e. pre-pandemic. We’ve moved from a somewhat predictable market to one that is currently seeing record speed of sales, record retail prices, record levels of demand but with constrained supply in the case of ICE vehicles.

In fact, January saw the number of visitors to our marketplace hit a record 80 million with February seeing an all-time record for median days to sell which hit 25 days.

You would think that these positive indicators would lead to an increase in consumer demand, and you’d be absolutely right. At the time of writing overall demand is up 12.2% year-on-year (YoY) with the overall Market Health currently at a very healthy 26.7%. In fact, as you can see below, both demand and Market Health have been steadily rising since August last year with 2023 so far seeing only positive levels of YoY demand.

Demand in the EV segment, which has seen plenty of negative headlines through 2023, is in fact on the rise with demand up 23.7% YoY at the time of writing, almost double the demand increase of petrol. But demand only tells part of the story.

Supply remains a challenge but where there is stock, it’s selling

Sticking with EVs, much of the negativity surrounding this fuel type in the market is down to over supply. The tail end of 2022 saw a huge influx of EVs entering the used market, with supply up 263.1% YoY.

This influx of supply has led to supply far outpacing demand giving us a current Market Health of -65.5% for EVs as a whole. This does not mean you should avoid stocking EVs at this time. As we’ve already highlighted, demand is up. It simply means that consumers have far more choices on the market and so you will need to price competitively. It’s therefore more important than ever to use data to know where the EV opportunity lies in your area. Having the full picture of current supply levels vs consumer demand is essential given the current market conditions.

Despite this massive influx of EV supply, overall the supply of used cars to the market has fallen by -11.4% YoY which.

When we add supply to chart we can see that supply has been falling since late 2022 and this, combined with the rise in demand, means that the Market Health and indeed used car prices remain strong.

So right now the market is performing well and you should be confident about the months ahead whilst continuing to use data to understand the live market and what stock you should be stocking and at what price based on live market supply and demand.

But what impact will this lack of supply have?

As you likely know, the supply shortages that have been present since 2020 are all down to a lack of new cars entering the market with 2.6 million new cars “lost” since 2019.

This means that there is currently an ever-shrinking number of 0-5-year-old vehicles on the road, with 27% less 0-5-year-old cars in the parc than there were in 2019. With less stock in this age range and the same volume of retailers competing for it, retailers’ stock profiles are now getting older. In 2022, the average age of stock on franchise and independent forecourts was circa one year older than in pre-pandemic 2019.

A lack of supply was the cause of the softening of used car sales we saw in 2022, rather than a drop in demand, with the drop in sales attributed to a drop in the sale of 0-5-year-old stock. However, when we look at the sales of over 5-year-old stock, where supply remains buoyant, we see that sales were in fact on the rise.

Price growth is now accelerating

The supply and demand dynamics that we are currently seeing all mean that used car prices remain strong. In fact, data from our Retail Price Index shows that used car prices in March rose by 2.3% YoY to an average of £17,720. This increase comes off the back of the 1.3% YoY increase recorded in February, making March’s price rise as first acceleration in the rate of YoY price growth in 10 months, having gradually slowed from the all-time high of 32.2% YoY in April 2022.

As the chart shows, we are still seeing no signs of a “cliff edge” drop in prices, with prices remaining incredibly stable and close to January’s record level.

Is end-to-end online retailing dead?

So far, the market is looking strong. Demand is up and the low supply are helping to keep the market and prices healthy. But one area of the market that has stalled is the online-only market. Despite a surge through the pandemic, consumer’s desire to buy a car entirely online has plateaued

But whilst interest in buying entirely online is waning, consumers do still want to do more of their car buying journey online.

This means you need to ensure that your online and offline experiences are totally synced and offering a truly omnichannel experience.

So are we going to see a downturn in the market?

Hopefully, by now you can see that the market remains incredibly strong.

There are of course hurdles with supply that present issues with stocking but, as we’ve seen, demand remains strong even for older stock where this is ample availability.

So right now, there are no signs of a market downturn and with prices remaining robust, you can be positive about the state of the market right now.

 As always it’s crucial to keep track of the market performance and you do this through our live market data, allowing you to track the market in real time and make data-based stocking and pricing decisions.