Considering showrooms have been forced to close for weeks on end, as a result of lockdowns, circuit breaks and firebreaks, the car retailing sector has shown remarkable resilience.
The first national lockdown in March was a bolt out of the blue and with no Plan Bs in place, sales pretty much stopped. For the car retailing sector the timing could not have been worse, coinciding as it did with the busiest sales period in the automotive calendar; the final week of the March plate-change.
Thousands of sales were lost and the sector has been playing catch-up ever since.
New car sales could start to recover in 2021
The scale of the shortfall is immense, prompting Cox Automotive to forecast new car sales in 2020 will only reach 1.6 million units, a year-on-year tumble of around a third. With new sales typically averaging over 2.3 million units, this would be the lowest new car sales total for decades.
New car sales have been a monumental challenge this year. Supply has been impacted by factory closures and choice has become more limited with carmakers using this as an opportunity to delete models from line-ups.
However, the new car market is expected to recover some lost ground next year, with the industry’s trade body, the Society of Motor Manufacturers and Traders (SMMT), forecasting 2 million registrations. But that will be dependent on how the economy and unemployment levels impact consumer confidence.
There’s also the tricky matter of how Brexit will play out, with the likelihood of hefty tariffs slapped on cars imported from Europe.
Used car sales holding firm after a bumper Q3
Against this backdrop, the used car market has been more robust.
Sales had dropped in the first quarter, before halting in Q2 during the lockdown. However, they rallied in Q3 with the SMMT reporting a 4.4% year-on-year rise, equating to 2.17 million used cars being transacted, the biggest quarterly sales since the end of 2016.
With showrooms across the UK fully reopen from July, there was sizeable pent-up demand for used cars which remained unsated throughout the summer. Welcome news for dealers and car supermarkets as average values, which had been rising for most of the year, continued to increase before cooling from October.
Despite these impressive gains, the used sector is not out of the woods yet as it’s currently down -17.5% year-on-year. Cox Automotive forecasts it will close the year at -19.2% on 6.4 million units, before starting its recovery in 2021 with 6.6 million units changing hands.
The value of lockdown lessons
While there’s no escaping just how brutal the year has been for dealers, the experience of the first lockdown prompted many to devise contingencies to deal with future restrictions.
When November’s month-long Lockdown 2.0 was introduced in England, dealers had processes and platforms in place to continue serving customers no longer allowed to visit dealerships.
And that message is getting through to buyers.
Buyers are staying in-market despite lockdowns
Research carried out by What Car? revealed that more than three-quarters of buyers looking to buy a car in November planned to continue shopping despite the potential impact of the lockdown.
The poll of 5,500 What Car? website visitors also found that 50% of those planning to buy were actually pulling forward their purchase in case of further restrictions.
Also, over a third said they were now more receptive to using online tools such as live video tours and live chat as part of their research process. Encouragingly, 30% said they were more comfortable with the prospect of buying a car now than during the last round of showroom closures.
Further evidence of buyers remaining active during Lockdown 2.0 was also provided by Parkers, the car reviews and advice website, which found 95% of car buyers saying they were intending to stay in-market despite showrooms being closed to them.
With the likelihood of more tier restrictions and lockdowns as we go into 2021, dealers need to keep their virtual lights on to make sure online buyers know they’re open for business!
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