New car market recovery will be slow, says Cox Auto
The new car market will start bouncing back this month, as showrooms reopen, but activity may not recover fully for a while.
That’s according to Cox Automotive, which has released its latest quarterly insight for the automotive sector.
While Q1 performance in 2021 fell 12% compared to 2020 (and 39.3% compared to 2019), the report says that Q2 performance will increase compared to 2020 due to the low starting point last year and due to “modest” pent-up demand.
But Cox Automotive predicts that Q2 2021 registrations will fall 5.9% compared to the 2000-2019 pre-pandemic average, hitting a level of 520,835 new car registrations. This is also a result of the supply constraints, due to the current disruption to supply chains and the semiconductor shortage, which Cox said will be felt across the world. Data and information services provider IHS Markit predicts that there will be one million fewer cars produced globally in Q1 2021, with 200,000 fewer vehicles built in Europe.
Philip Nothard, Cox Automotive’s customer insight & strategy director, said: “By far the largest impact in supply constraints will be felt in the sector that’s growing the most: battery electric vehicles (BEVs) and plug-in hybrids (PHEVs). Their complex design can feature around hundreds of pounds worth of semiconductors, compared to that of a typical internal combustion engine vehicle (ICE), which has a typical value of less than a hundred pounds.”
With regards to consumer confidence, Nothard added: “It remains to be seen what the consumer appetite for new cars will be like now that physical showrooms have reopened. Disposable income was massively boosted last year so there could be lots more people with money to spend on a new car. On the other hand, due to the unpredictable nature of the Covid pandemic, it’s unlikely that there will be too much ‘irresponsible’ spending.
“We saw a small recovery year-on-year at the end of March this year, but that was largely because virtually no sales took place from 23rd March 2020 following the first lockdown announcement. Overall, the market has been significantly impacted during what is a crucial quarter.”
He added that market is seeing an increase in volumes of fleet, which could be a result of incentivised activity to maximise the result for the first crucial quarter of the year.
Cox Automotive painted a similar picture for the used market. While used car stock levels are broadly above 2020 volumes, supply shortages are expected to affect retailers throughout Q2 until lower-mileage supply hits the market.