9:57 am, October 27, 2022
A full recovery of the car market is unlikely for at least two years.
That’s according to S&P Global Ratings, which is pinning the blame on weakening demand despite supply chain issues easing.
The credit rating agency said worldwide car sales were likely to be flat this year, with Europe performing the worst of all regions, and it’ll be late 2024 at the earliest before sales even get near 2019’s level of 90m.
Car sales are likely to drop by 10 per cent this year to their lowest in two decades, thanks to Russia’s invasion of Ukraine affecting supply chains, it said.
Demand for semiconductors rocketed during the first series of lockdowns and priority shifted to other sectors, such as gaming, to meet demand.
Since then, the automotive industry has been fighting to keep pace.
Supplies are getting better, but with every new car needing an average of some 1,500 microchips – with top-end models using twice that figure – the backlog is going to take a while to clear.
Manufacturers have reacted to the shortage by concentrating on higher-margin vehicles, which in turn has helped dealers’ profits. The drop in new car supply also caused used car prices to soar.
As the UK looks set for a recession, new car demand will probably drop, and higher interest rates will mean pricier car financing as well, the Investors’ Chronicle arm of the Financial Times reported SMMT chief executive Mike Hawes as saying.
But he reckons the deliveries backlog will give dealers ‘a degree of a buffer’.
People who have been waiting for a year for a car will be keen to get it, and even if some of them develop cold feet, others who are waiting will happily step in, said Hawes.
