Car dealers are optimistic about the sector’s future, according to new research published today (Jul 22).
Close Brothers Motor Finance’s latest Britain Under the Bonnet report reveals that short-term confidence plummeted during April but medium-to-long-term optimism has begun to improve.
At the start of the year, 98 per cent of car dealers in a survey of 200 were confident about the year ahead, with nearly two-thirds – 63 per cent – very confident.
However, after the lockdown kicked in and showrooms shut, a poll of 51 dealers in late April showed that 43 per cent weren’t confident about their prospects over the following six months.
Nearly half (47 per cent) were neither confident nor unconfident and only 10 per cent were confident.
Meanwhile, 41 per cent weren’t sure about the motor industry and were non-committal about confidence in its recovery, but 18 per cent were confident.
More than half of the dealers (55 per cent) had taken out finance to stay afloat, nearly half (47 per cent) had furloughed staff and 43 per cent had made redundancies.
Things look hopeful for the medium and long term, though, said Close Brothers, with dealers expecting the UK to mirror China and Germany’s V-shaped recovery. More than two-fifths – 43 per cent – were confident about the outlook for their business over the next seven to 18 months and 20 per cent were apprehensive.
Beyond 18 months, 57 per cent were confident and just 10 per cent were worried.
A fuller recovery is expected for the broader market but will take more time, the report found. Medium-term confidence is 31 per cent, but in the long term 71 per cent of dealers have a positive feel.
However, with manufacturing below capacity because of social distancing and nearly half (49 per cent) of dealers struggling for stock, supply concerns remain.
Dealers are divided over the trends likely to shape next year, with nearly half (47 per cent) reckoning buyers will move towards new cars and 53 per cent expecting a resurgence in used cars.
Meanwhile, nearly three-quarters (71 per cent) think more consumers will use finance to buy their cars.
Seán Kemple, pictured, director of sales at Close Brothers Motor Finance, said: ‘The motor industry has not had an easy few years, with external forces like Brexit and economic uncertainty warring with sector-specific challenges around fuel-type and regulation.
‘Dealers were extremely optimistic for 2020 as a year of recovery, so Covid-19 has hit extraordinarily hard.
‘Government support around business rates, the furlough scheme, and frozen fuel duties have been invaluable, but manufacturers, dealers, and finance providers will have to work hard to return to some semblance of normality.’
He said the sector now had the chance to ‘Build Back Better’, in a reference to the coronavirus recovery plan campaign, adding: ‘We’ve already seen demand begin to bounce back for new cars, and consumers are crying out for advice and guidance.
‘Trends like the shift to alternative fuel vehicles are likely to accelerate, and a reticence to use public transport could boost both the used and new markets.
‘Dealers need to have their fingers on the pulse and be equipped to guide customers through big decisions over the next couple of years. In the shorter term, government support will be vital to get the sector back on its feet.’
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