12:08 pm, April 9, 2024
Carmakers are expected to continue slashing new car prices in an effort to stimulate currently ‘sluggish’ retail demand, believes Auto Trader.
New car registration figures for March published by the Society of Motor Manufacturers and Traders last week showed a 10.4% rise, and represented the 20th consecutive month of growth.
However, behind the headlines, the sizeable uplift was entirely due to booming sales of cars in the fleet sector which rose by a whopping 29.6%. The private market, though, slumped by 7.7%, with the SMMT blaming a ‘challenging economic backdrop of low growth, weak consumer confidence and high interest rates’.
With car manufacturers pushing new cars into the market, they are turning to discounting to spur consumers to buy – and it’s only set to continue, believes Auto Trader.
Speaking on Car Dealer Live, the firm’s commercial director, Ian Plummer, said: ‘We’re now in a market where demand is probably below the level of supply – and when that happens, you to stimulate demand and that’s what we are seeing. Manufacturers are stimulating interest in their vehicles to help them stand out and drag people out of used cars and into new ones.
‘Some three in four new cars advertised on Auto Trader have a discount on them, and that’s grown quite a lot – around 15% on prior year. The actual amount that is being discounted has grown from around 5-6% a year ago to nearly 9%.
‘This level of push is even greater with electric, which are getting around an 11% discount. Electric is the point in the market where the pressure is being felt most keenly.’
He added: ‘All of this activity [discounting] will need to continue to grow as private retail demand remains looking sluggish – it’s going to need a bit more stimulus.’
Plummer insisted the new car market isn’t overheating, but it’s very much in a ‘push’ phase where the balance of supply and demand has tipped in favour of supply.
He also explained how there is demand for new electric cars, but price was a determining factor in whether the consumer chooses to purchase.
‘New electric cars are still too expensive for the majority of people,’ he said, ‘as there often is a 30% price gap between ICE and EV.
‘We are now well beyond the “early adopter” phase of people who could maybe afford to pay the “green premium” of doing the right thing. We are going to need the price equation squared off by manufacturers, and also to allow the manufacturers to achieve regulatory challenges [ZEV mandate] because it looks like the government isn’t going to come to their aid.’
Elsewhere in the interview, Plummer chats about how carmakers will try to meet the 22% EV quota in the ZEV mandate, and whether Chinese carmakers will really make a dent on the UK new car market.
Click the video at the top of this story to what the full interview.
