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New car sales will rise in Q2 thanks to pent-up demand, but don’t expect return to booming days of Summer 2020

Time 4 weeks ago

New car sales are expected to bounce back in April and throughout the rest of Q2, but expectations of booming sales need to be tempered.

That’s the view of Cox Automotive in its latest quarterly insight. The company surveyed around 250 dealers and found two-fifths (42 per cent) are expecting new car registrations to increase in 2021 and the next few months to be very busy.

Cox Automotive is urging caution, however, saying that while dealers can expect an uplift, sales are unlikely to be at the levels seen when dealers reopened after the first lockdown in summer 2020.

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Philip Nothard, Cox Automotive’s customer insight & strategy director, said: ‘We know that Q2 performance will increase, although from a low starting point.

‘However, because of the first national lockdown in spring 2020, comparisons will need to be made to 2019 to get the true picture, as sales should be significantly higher than last year.’

Cox’s report outlines three scenarios for the new car market, with the most likely scenario to be predicted as a -7.7 per cent (-155,078) downgrade on Cox Automotive’s November 2020 forecast, at 1.87m new car registrations by the end of 2021.

Q2 2021 specifically will see 520,835 new car registrations, down 5.9 per cent on the 2000-2019 pre-pandemic average, it said.

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Nothard added: ‘This scenario assumes some modest pent-up demand in April and May, but with some consumer nervousness remaining, it is likely that retail activity won’t recover fully.

‘This also assumes a continuation of the same supply constraints we are currently witnessing.’

As for consumer behaviours affecting sales, Nothard said: ‘It remains to be seen what the consumer appetite for new cars will be like now that physical showrooms have reopened.

‘Disposable income was massively boosted last year so there could be lots more people with money to spend on a new car.

‘On the other hand, due to the unpredictable nature of the Covid pandemic, it’s unlikely that there will be too much “irresponsible” spending.

‘We saw a small recovery year-on-year at the end of March this year, but that was largely because virtually no sales took place from March 23, 2020 following the first lockdown announcement. Overall, the market has been significantly impacted during what is a crucial quarter.

‘We have seen an increase in volumes of fleet, which could be a result of incentivised activity to maximise the result for the first crucial quarter of the year.

‘However, any new car registration is likely to create a used car for the future at some stage of its life.’

In total, the UK has seen 12 per cent fewer new car registrations in Q1 compared to 2020. Compared to 2019, the UK has seen 39.3 per cent fewer registrations in Q1.

As reported by Car Dealer, the Society of Motor Manufacturers and Traders said last week around 8,300 new cars will need to be registered every single trading day for the rest of the year for the sector to return to pre-pandemic levels.

By comparison, the industry has averaged around 7,400 a day during the past decade and current levels are closer to 5,600 a day.

Used car supply shortages

Meanwhile, Cox Automotive has also looked at the used car market and says that while stock levels are broadly above 2020 volumes, supply shortages are expected to affect retailers throughout Q2 until lower mileage supply hits the market.

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Nothard said: ‘Stock management and utilisation will be fundamental to maximising profitability for used car retailers, particularly for independent dealers where margins are so tight.

‘As larger disruptors and consolidated businesses continue to secure what little stock is out there, independent dealers will need to review stock purchasing strategies and spread supply routes.

‘These disruptors have benefitted from the COVID market, but the competition will be intense as the market fully reopens.’

James Batchelor's avatar

James – or Batch as he’s known – started at Car Dealer in 2010, first as the work experience boy, eventually becoming editor in 2013. He worked for Auto Express as editor-at-large and was the face of Carbuyer’s YouTube reviews. In 2020, he went freelance and now writes for a number of national titles and contributes regularly to Car Dealer.

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