Car Dealer Live

Car Dealer Live: Semiconductor crisis and new car shortage could see carmakers hiking prices

  • Shortage of raw materials and components is putting pressure on carmakers
  • New car prices going up is ‘likely’
  • ‘Price ceiling’ for used cars is being smashed

Time 6 months ago

New car supply shortages may see some car manufacturers put up list prices.

In the video at the top of this story, Auto Trader commercial director, Ian Plummer, told Car Dealer Live the car industry is facing considerable upheaval due to a shortage of raw materials and components – and this may lead to some carmakers hiking prices.

‘We’ve got the well-known factor of semiconductor shortages, which has been more than rumbling along for last few months,’ he said.

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‘But there are concerns around lack of other raw materials, such as aluminium, steel and rubber, and so the prices of those raw materials are shooting up and there’s even scarcer supply.’

Plummer agreed with the Society of Motor Manufacturers and Traders’ revised forecast of fewer than 1.9m new cars will be registered in 2021, as a consequence of the third national lockdown and stifled new car supply.

These factors may lead to carmakers being forced to put up prices, said Plummer.

‘It’s likely manufacturers will look to put pricing up. I’m hearing manufacturers are already doing that in certain markets in Europe. I think there’s definitely a temptation to look at that.

‘Typically, manufacturers will put up prices often twice a year, but by small, low single-digit percentage numbers. There’s a risk if you bring your price up too much, that obviously you have a knock-on effect on the cars out in the market.

‘It’s a tricky balance, but I do think there will be some relatively minor price increases coming through.’

Potential price rises coupled with surging used car prices, especially on nearly-new cars, is affecting the commonly held view of there being a ‘price ceiling’ with used cars.

Last week, Auto Trader revealed it had seen around 700 used cars priced higher than their brand-new counterparts.

At the beginning of July, the firm found one in five nearly new cars on its platform were priced within 10 per cent of their new car equivalents.

Also, said Auto Trader, there are many models currently achieving very high prices after two years of purchase, with 87 different variants advertised on the used car platform currently priced at 80 per cent of RRP or more.

Plummer told Car Dealer: ‘A whole host of vehicles are well ahead of the normal level of pricing you’d expect them to be seeing in terms of a gap to new car.

‘Bear in mind that the manufacturer recommended retail prices are very rarely paid by the end consumer – there’s a deposit contribution from the brand and there might be a retailer discount which adds to that.

‘So, if you’re anything like 80 per cent of RRP, and you take the VAT off the car as well, I think you’re already definitely butting up against that price ceiling.’

The Auto Trader data came as Cap HPI told Car Dealer crazy used car demand is pushing up prices of nearly-new used vehicles – some above the recommended retail price of their new counterparts.

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Data compiled by the firm for Car Dealer showed the 2018-2020 Suzuki Jimny, as of July 2021, has a trade value of £25,467 at the one-year/10,000-mile mark.

The average list price of the dinky off-roader when it was brand new was £17,846.

Click the video at the top of this story to watch the full interview with Auto Trader

James Batchelor's avatar

James – or Batch as he’s known – started at Car Dealer in 2010, first as the work experience boy, eventually becoming editor in 2013. He worked for Auto Express as editor-at-large and was the face of Carbuyer’s YouTube reviews. In 2020, he went freelance and now writes for a number of national titles and contributes regularly to Car Dealer. In October 2021 he became Car Dealer's associate editor.

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