The UK new car market may have bounced back in April, but dealers shouldn’t be ‘blindsided’ by optimism.
That’s the warning from Cox Automotive which is urging dealers to be cautious of a momentary strong blip in new car sales, as significant disruption is expected in the months ahead.
April saw 141,583 new cars registered, which represented a 3,177 per cent increase on the same month last year as showrooms were shut due to lockdown restrictions.
While April 2021’s figures were nearly 13 per cent down on a pre-pandemic April average, they were the second highest year-on-year in Europe, said Cox Automotive.
The UK finished behind Italy – 145,000 sales and a 3,276 per cent increase on the previous year – but ahead of Spain, France and Germany recorded numbers below the UK at 1,788 per cent, 569 per cent and 90 per cent respectively.
However, despite a much-needed boost in UK new car sales from pent-up demand, Cox Automotive is urging caution with significant disruption expected in the next few months.
New car registrations across Europe continue to struggle to find a way out of the pandemic, and there are challenges faced from the supply, said the firm.
Philip Nothard, Cox Automotive’s insight and strategy director, said: ‘The latest UK data for new car sales aligns to our most recent forecast. Showroom reopenings and the easing of lockdown restrictions delivered a vital boost.
‘Still, retailers need to remain vigilant in the months to come and not be blindsided by this early optimism.
Pricing to the strength of the market rather than looking simply at the profit margins on each car will put dealers in a strong position to ride out this difficult period.
‘The new car market is undergoing some of the most severe raw material shortages for decades, with semiconductors, aluminium and rubber at a premium.
‘Manufacturers are reporting real challenges with some forced to halt production and others considerably slowing down volumes. This could have a more significant impact on the vehicle retail sector than coronavirus itself.
‘With new-car supply limping, there will be fewer part-exchanges available for dealers to take advantage of, triggering a reduced supply of used cars into the market.
‘Furthermore, fewer cars will go into fleet channels, affecting de-fleeting and will continue to affect used supply. These challenges could well leave the market reeling until deep into 2022.’
Nothard suggests there are several actions that dealers can take to mitigate these fluctuations in supply and demand.
He refers to a wholesale to retail lag and urges dealerships not to be afraid to alter their prices to reflect the market situation.
‘While we’ve had a great short-term boost to vehicle retail, dealers should not expect supplies of either new or used stock in great numbers any time soon.
‘This means that maximising profitability is critical. The sector mustn’t be afraid to raise prices to counter the effects of supply disruption.
‘Pricing to the strength of the market rather than looking simply at the profit margins on each car will put dealers in a strong position to ride out this difficult period.’
Auto Trader reported last week one in five dealers (out of 2,316 quizzed) have already made hiked prices across all stock on their forecourts.
Some 22 per cent raised prices in April – up from 16 per cent in March and 15 per cent in February, according to Auto Trader.