12:14 pm, March 19, 2024
Car dealers need to look beyond the headlines and study the finer details to ensure they’re one step ahead of a rapidly changing used car market.
That was the overall message of Cox Automotive’s fascinating white paper session at Car Dealer Live 2024. The company used the conference to publish its industry-first, four-year used car market forecast by fuel type.
Car Dealer’s James Batchelor was joined by Cox’s insights director Philip Nothard, along with Greenhous regional retail director Danny Minshall, and Suzuki GB director Dale Wyatt on the panel.
The speakers took part in a vibrant discussion about used electric cars, demand for used hybrids and EVs, and how dealers can play their part in helping consumers switch to electrified models.
However, Cox’s shocking prediction concerned diesel cars. Its research found that EV share of registrations will grow by 160% versus 2020-23 volumes to 2.3 million units or 28% of sales, while hybrids will represent 25% of registrations, with two million units sold.
That growth will come at a significant cost for diesel and petrol derivatives, with diesel share over the four years forecast to shrink to just 3%, with 62,000 units registered in 2027, while petrol, with 3.5 million registrations over the four years, will fall to just a 35% share by 2028.
Nothard said: ‘The registration of the millionth EV in the UK is an important milestone in the transition to zero-emission motoring.
‘But with two in every five new cars joining the UK car parc this year forecast to be EV or hybrid, and with that proportion destined to grow rapidly in future years, dynamics in the used market over the next four years will arguably rival the complexity and impact of those experienced during the pandemic.’
The change comes on the back of a new car market that contracted by almost a third in the four years between January 2020 and December 2023 when compared with the equivalent period 2016-19, equalling a loss of 3.1m cars.
The composition of the UK car parc has also changed, said Cox Automotive.
In 2016, EVs claimed just a 0.4% share while hybrids took 3%. By 2019, this had risen to 1.6% and 6% respectively, and by the end of 2023 their share had each shot up to 17% and 20%.
The opposite can be said for petrol and diesel, though.
In the period 2016-19, ICE cars made up 95% of new car registrations, but that number fell to 71% in the period 2020-23 – a loss of 4.6m cars.
The ICE decline accelerated throughout this period, dropping from an 83% market share in 2020 to 64% in 2023.
Cox Automotive forecasts a further drop of 35% between now and the end of 2027, meaning just 784,000 new ICE vehicles will hit the road in 2027 versus the 1.2m recorded in 2023.
Cox Automotive’s Philip Nothard was joined by Danny Minshall and Dale Wyatt
Diesel has seen the most dramatic decline, though, from a 38% share in 2016-19 to 13% in 2020-23.
By 2023, diesel vehicles including mild-hybrid variants represented just 8% of new registrations, and Cox Automotive predicts that this share will have plummeted to 3% by 2028 – a loss of another 488,000 vehicles over four years on top of the 2.9m lost since 2020.
Meanwhile, at 57% in 2016-19 versus 58% in 2020-23, petrol volumes have remained steady.
But Cox Automotive still foresees a decline over the next four- ears, with its share of all registrations dropping to 51% by the end of this year and 35% by 2028.
This equates to a loss of 2.3m petrol-powered vehicles aged 0-8 years from the used market by the end of 2027.
Nothard said: ‘It’s almost impossible to overstate the shift in the UK car parc over the past four years and how that change will continue to accelerate.
‘Today’s parc for cars aged 0-4 years differs significantly from 2020 and will contrast even more so in 2028.
‘Manufacturers will continue to be driven by legislation rather than consumer demand and ICE will be all but gone from the UK new car market long before the 2035 deadline.
‘For used car retailers, this means a battle for the best stock, while for consumers it means diminishing choice and above-inflation price increases.’
Cox Automotive urged caution as to whether consumer demand for used EVs will reflect the pace of EV registrations in the medium term.
Nothard said he believed there’ll be an increasing oversupply of EVs into the used market, at least until values become less volatile and consumer confidence grows, while price parity between EV and ICE is as likely to be driven by ICE values rising as by EV prices dropping.
He added: ‘We must remember that in 2023, 94% of used cars sold were ICE and many consumers will likely remain loyal to this fuel type for as long as they can.
‘The average used car buyer is often seeking to replace their existing car with something comparable that’s affordable and fits their lifestyle.
‘They may not yet be ready to make the leap into EV for financial, infrastructure or use-case reasons.
‘And while the market for used EVs will now establish itself as volumes come on stream, it faces competition from manufacturers and dealers chasing new registration volume via compelling deals and finance offers.
‘Many potential used buyers are cautious about longer-term EV values, their comparably high outright purchase cost and the risk of technological obsolescence.
‘That isn’t to say EVs don’t represent good value on the used market or will sit on forecourts unsold, though. In fact, there’s evidence that shows the contrary is happening.
‘However, there is also plenty of evidence pointing to reticence on the part of private buyers while volumes in the used market are currently too small to draw meaningful conclusions.’
Nothard concluded: ‘This is by no means a picture of doom for the used car sector, but it would be naive to think the so-called new normal has yet been established.
‘The overall used market is forecast to rise modestly, albeit its composition by 2028 will differ from what we’re used to today.’
You can read the report in full by clicking here
Original reporting by John Bowman
Want to watch what went on at Car Dealer Live 2024? Replay tickets are available via the Car Dealer Live website.
