New car registrations could be back to normal levels of around 2.3m to 2.4m a year by 2025.
That was what dealer groups expert Mike Allen reckoned when he appeared on Car Dealer Live.
He and host James Batchelor discussed the current view of the motor trade in investors’ eyes, whether it was ripe for outside investment, and the overall outlook – including the impact of Brexit.
‘I think people have been impressed with how quickly the recovery has happened and how well the businesses were run during lockdown,’ said the head of research at independent investment banking operation Zeus Capital.
‘But investments are all about looking forward and most investors will have at least a 12-month investment horizon.
‘The issue we’re grappling with at the moment is Brexit and what does it look like in terms of supply, what will the currency do, what’s the appetite of the OEMs?’
New car registrations were steadily growing between 2011 and 2016, from 1.9m to 2.7m, with some commenting at the time that the market could reach three million.
However, after the UK voted to leave the EU consumer confidence fell and new car sales with it, and by last year had returned to 2013 levels of 2.3m registrations.
Already in 2020 the new car market is 39 per cent behind last year’s figures, with 915,615 new cars registered between January and August.
Allen said: ‘I think we’ve got a good idea of how 2020 will end for a lot of dealers now, and that will be very apparent once the September data comes out, but I think it’s still tricky understanding the next year or two.’
He pointed out that after the 2008 recession the recovery the following year was sharp, with the used car market performing very strongly with extremely strong residuals .
‘Will the new car market get back to historic normalised levels of 2.3, 2.4 million? Yes, I believe so.
‘I think we’ll have a difficult year in 2021 but then I think we can then hopefully see a decent path back to normalised new car registrations by 2025.
‘Once you can sketch that out to investors, the appetite will increase and grow.’
He also warned: ‘If we have a bad Brexit and sterling collapses or weakens a lot very quickly against the dollar, then I think you will see the Americans look at it. They tend to be a bit more currency-led.’
His advice was to keep an eye on the pound over the next couple of months in terms of both investment appetite and supply dynamics.
Watch the interview in full by clicking on the main image.