9:00 am, August 14, 2024
The new car market will be ‘extremely challenging’ in the final quarter of this year – and it could even surpass the difficult times of 2008 and 2020.
That’s the view of Cox Automotive. The statement came as the firm revised its new car sales forecast for 2024 to 2,018,446 registrations – 2.07% decrease on its earlier prediction.
Its baseline forecast anticipates 552,891 registrations in Q3 and 458,792 in Q4. The year will end 6.1% up on 2023’s full-year volume, but 12.7% on the 2000-2019 average.
The company said the decrease is a reflection of the first two quarters as recorded by the Society of Motor Manufacturers and Traders (SMMT), and the expectation of the ZEV mandate biting hard in the last quarter of the year.
Carmakers will likely be under more pressure than they were during previous challenging times in the financial crash of 2008 and the Covid-19 pandemic of 2020, said Cox.
The ZEV mandate is set to influence strategic and tactical activity on the part of many manufacturers.
The company’s insight director, Philip Nothard, cautions that while the headline numbers are positive, especially in the context of the last four years, how they will be achieved could have painful ramifications across the sector.
He said: ‘There’s no doubt, the performance we’ve seen during the first half of this year, with over one million registrations for the first time this decade and 24 consecutive months of growth, is a good news story for the new car market.
‘We’ve also seen major OEMs, including BMW, Mercedes, Renault and Peugeot, returning to form from a volume perspective. The net result is that registrations are tracking ahead of our baseline forecast at this point, and we remain confident that our forecast of two million registrations for the full year is realistic.
‘How this number will be achieved is a cause for concern. Several prominent manufacturers have made it clear that non-compliance with the ZEV mandate is not an option and that they have no intention of paying penalties.
‘But with EV sales falling well short of where they need to be, this leaves them with just a handful of options if they are to meet this pledge.
‘They will either prioritise pushing EV stock into the market through aggressive fleet and retail price strategies, or restrict the availability of ICE and PHEV derivatives to force EV sales. Some may do both.’
Nothard said this will likely create an ‘unrealistic and unnatural’ market, with far-reaching consequences over the long-term, including manufacturer and dealer profitability, consumer choice and residual values.
‘Manufacturers are caught between a rock and a hard place. They’re under impossible financial pressure, facing increasing competition, and carrying the responsibility to fast-track the transition to zero-emission motoring,’ he said.
‘They have little choice but to push hard to make their EV products appealing to buyers, be that through financial incentives or by limiting the alternatives.
‘Dealers will inevitably take on some of this burden, as will fleets and private buyers, in the form of unpredictable residual values when these heavily discounted EVs start to flood the used market in 12-36 months’ time.’
He added: ‘The year is progressing at pace, and with no government concession on the ZEV timetable or any support mechanisms in sight, the risk of significant challenge, unlike anything seen in over a decade, in Q4 is genuine.’
