New car 2021 forecast downgraded as chip shortage plays on
Cox Automotive has downgraded its new car forecast for the remainder of 2021 due to the ongoing sector supply issues.
Its full-year 2021 forecast has been adjusted downwards to 1,823,426 new car transactions, a drop of 2.48% (some 46,349 units) versus its April forecast and a fall of 21.1% compared to the 2000-2019 average.
This is based on a revision to its most likely scenario for Q3 that would see the quarter end on 522,425 new car transactions, down 17.7% on the 2000-2019 average.
Cox said the downgrade was based on latest data that reveals the continued challenge of boosting new car production to meet pent-up demand, and supply chains faltering in the wake of a global pandemic.
Figures published by the Society of Motor Manufacturers and Traders (SMMT) earlier this month revealed new car registrations had fallen by 16.4% last month, compared with the previous decade June average.
Philip Nothard, insight & strategy director for Cox Automotive, said: “We’re witnessing a perfect storm for the automotive industry. Most in the industry know about the shortages in semiconductors, aluminium price rises and rubber and plastics shortages. But additional issues such as manufacturers shifting their R&D and manufacturing capabilities towards EVs, and the implications of the Brexit transition period and delays are less discussed.
“To get around the challenges and the reliance of technology in vehicles today, manufacturers are refocusing the available materials towards their most popular and profitable models for the time being – EVs, hybrids and higher-margin vehicles such as SUVs and even their commercial vehicle divisions where there is increased demand, in favour of cheaper, less profitable and smaller city cars.”
The challenges in the new car sector mean the used car market is currently enjoying its most significant influence on the overall health of the automotive industry.
Nothard outlined: “Arguably, the used car market has never had this much influence on the industry as a whole. Buyers are flocking towards used cars with money to splash after a largely inactive year, and dealers are enjoying an uplift in activity as a result. But this can only go on for so long, as supply isn’t there to meet demand.”
The effects of the lack of new car supply are being felt most by fleet and rental market companies who, in the face of very limited new product, are extending contracts and continuing to utilise the vehicles they already have rather than apply their typical vehicle replacement strategies.
Nothard added: “Lack of nearly new stock means volumes are lower overall and are typically older and have higher miles, while average prices are rising as dealers compete for what little stock is available. Used car prices rises can only rise so far until the situation is unsustainable. However, Cap HPI is reporting increasing numbers of used vehicles with values above the cost new.
“We don’t expect new car supply shortages to be resolved until H1 2022, so the knock-on effects in the used car market will be around for some time yet. However, while trade price realignments are expected, we are unlikely to see a flood of vehicles into the used market, so the prospect of a significant drop in values is small.
“However, we must be careful that this doesn’t turn into a bubble, and keep fingers crossed that as we go into the autumn, we remain free of restrictions and that the economy bounces back as support programmes are removed.”
- Nothard’s comments are included in the latest issue of Cox Automotive’s AutoFocus quarterly insight magazine. To access the new issue, click here.