The UK new car industry isn’t just being affected by the global shortage of semiconductors, but also by Brexit and agency sales models.
That’s the view of Cox Automotive. Its strategy and insights director, Philip Nothard, has warning that further disruption following on from a fall in new car sales last month is set to continue.
The new car vehicle supply chain is not not just feeling the effect of a shortage of semicondutors, but also by an assortment of concerns including Brexit and agency sales models, says Nothard.
‘We’re all very aware of the challenges caused by semiconductor shortages. However, there are even more significant challenges facing the new vehicle market which are likely to contribute to further market decline. For instance, the true impact of Brexit is yet to be felt.
‘The automotive industry within the UK and globally is having to change and rethink distribution strategies. This can lead to a delay in the movement of goods into the UK.
‘In addition, there are pending issues facing manufacturers because there will be new vehicle tariffs applied to new cars coming into the country when production does catch up.’
Nothard believes agency sales and the growth of online sales pose challenges, too.
‘There’s also the planning or adaption of agency model strategies by vehicle manufacturers in the sales process of new cars,’ he says.
‘Consumers are increasingly buying online which also extends to cars for those who decide not to follow the traditional sales process in dealerships.
‘The pandemic has given manufacturers and dealers time to reflect on how they sell cars and the increasing ways that it can take place.’
The bottom line is that although both the retailers and OEMs face supply challenges, they will remain focused on annual market shares in each global market and position against their peers
Nothard also points towards manufacturers’ electrification strategies having a profound impact on new vehicle registrations – the latest SMMT figures showed June’s best-selling new car was the electric Tesla Model 3.
‘Manufacturers will be conscious of the imminent introduction of fines for those who breach Corporate Average Fuel Economy (CAFE) regulations – which will push traditional OEMs towards the EV market.
‘In addition, we’re likely to see more EVs topping the vehicle registrations list in future, as many OEMs use raw material shortages to accelerate the transition away from ICE (internal combustion engine) to EV.
‘This disruption is likely to keep the used vehicle market continuing its upward trajectory in terms of vehicle prices and demand.
‘The bottom line is that although both the retailers and OEMs face supply challenges, they will remain focused on annual market shares in each global market and position against their peers.’
Nothard believes new car supply pressures will continue to be felt into 2022 and fuel the current used car price boom.
However, he predicts that the situation will stabilise as winter arrives, furlough ends, and the economy opens – causing consumers to spend their money elsewhere and subsequently allowing the government to begin recouping loans.
‘It’s a great time to be selling a used car as they will fetch higher prices, but not so much to buy one.
‘Also, it’s also not great news for dealers operating within the current or expanding ULEZ areas in London.
‘Trying to sell a non-compliant petrol or diesel car within this area will be more difficult.’