8:48 am, April 2, 2021
Thankfully for most of us there are few global events that we have lived through which have had a clear ‘before’ and ‘after’ impact on everyone’s lives.
However, the pandemic has not only changed life profoundly for most people, it has also changed industries – not least the automotive sector.
As we’ve now passed the 12-month milestone since the first lockdown, I wanted to take the opportunity to reflect on what has been a pivotal year for the automotive industry.
Strong demand
Looking back to conversations I had with retailers in March 2020, all were understandably very worried and facing the possibility of no sales as forecourts closed.
Fast forward a year and the industry has risen to the challenge, fuelled by strong consumer demand, and we have seen many retailers grow both sales and profits in lockdown.
One thing that has surpassed our initial expectations is consumer confidence and the increase in demand for cars overall.
This growth is reflected in the fact that most retailers are performing at more than 90 per cent of normal trading volumes according to our proxy sold data, which is a significant acceleration on the 70 per cent and 80 per cent recorded in January and February respectively.
This is very much in line with the very strong audience performance we’ve seen on Auto Trader, with March visits and time on site all setting new records up 27 per cent and 22 per cent respectively over 2019 levels.
Encouragingly, in addition to these metrics, several wider economic factors point to another period of strong retail demand once forecourts can fully reopen in April.
The latest Bank of England findings indicate average household finances are in better shape than they were pre-Covid, with savings around five times as much as in any other nine-month period and a reduction in debt.
This aligns to our own research which shows that consumers’ confidence in being able to afford their next car remains very high.
There are other factors which point to a very positive outlook for the months ahead, including the resurgence in appetite for car ownership. In an on-site survey we ran on Auto Trader, 27 per cent of consumers looking to buy a car think that ownership is more important than it was before Covid-19.
Of those people that agreed that car ownership is more important now, 40 per cent stated it was because of the independence it provided, 33 per cent said it was more important to have a car to limit their use of public transport and 22 per cent stated it was to use for staycations.
Demanding digital
While forecourts fully re-opening is an important step, the biggest change in our industry is the rise of online car-buying.
Digital has become the ‘new normal’ for consumers and our research suggests more of the car buying journey will be completed online.
Research from PwC suggests many consumers will not revert back to old behaviours once things return to normal.
For example, consumers shopped more online for non-groceries during the pandemic and enjoyed the experience – this means they are highly likely to carry this behaviour forward post lockdown.
While not specifically about the automotive industry, once you consider this research alongside all the data about the car buying journey and the desire for many consumers to do more online, we can’t ignore it or get complacent and think consumers will go back to pre-lockdown ways.
Young people are back
Over the last year, we’ve also seen a surge in younger people looking to buy cars. Prior to the pandemic, many commentators had written off young people from wanting to own their own car themselves, opting instead for more flexible alternatives like car sharing models.
However, over the last 12 months, we’ve seen an increase from 13 per cent of our audience coming from 18-24 year olds to 18 per cent, and in research we commissioned recently, 22 per cent of 17-24 year olds also said they have missed out on taking their driving test during lockdown.
We expect strong pent up demand for car buying from this segment once restrictions are lifted.
Build back better
Another trend that has emerged is an increased focused on making more sustainable lifestyle choices.
According to research we carried out, two thirds (63 per cent) of consumers are focusing on a more sustainable lifestyle as a result of the pandemic.
As part of this, one in five (21 per cent) of consumers we asked are planning to stop using petrol and diesel cars and are now considering purchasing an electric vehicle or alternative fuel vehicle.
Our research found 21 per cent were strongly considering buying an EV/AFV once life starts to normalise, and 60 per cent who don’t currently own an EV / AFV expect to own one within the next five years.
‘Adapting for survival’ to ‘adapting for growth’
Retailers have been quick to adapt and embrace digital retailing by offering new services including home delivery and click and collect.
Many retailers have also invested significantly in creating the necessary infrastructure to support digital retailing.
While for many this may have seemed like a necessary cost at the time, it is impressive how many retailers have turned this investment – and the challenging environment – into opportunity and also realised efficiency gains along the way.
Competition has increased
Many may be concerned that the pandemic has accelerated the rise of new entrants to the market, with big funding and advertising budgets, who are challenging the traditional retail model and educating car buyers on the advantages of digital.
Competition can and should be positive for the industry. That said, the emergence of more car retailers over time may become a threat to the traditional model and that’s why the move to offer digital services is key for retailers looking to the future.
Our mission remains to support retailers with this transition, by providing the technology they need to compete and access this growing audience, regardless of their size.
Looking to the future
During the height of the pandemic, one of my big learnings was that while we were all in the same storm, we were definitely not all in the same boat.
This drove us to support our people, our customers and the industry in ways that we’d never have thought possible before the pandemic.
We’re at a critical moment now, where all of the learnings from adapting for survival in the last 12 months, need to be channelled into adapting for growth in the next year.
Those that embrace these learnings will be those that shape the future of our industry. 2020 was definitely the year that demanded these changes but 2021 will be the year that they become competitive advantages.
Nathan Coe is the chief executive officer of Auto Trader
