6:47 am, January 9, 2022
‘VUCA’ is likely to become the motor trade’s new buzzword for used car values in 2022, believes Cox Automotive.
Standing for volatility, uncertainly, complexity, and ambiguity, VUCA describes the ‘situation of constant, unpredictable change that is now the norm throughout several industries as businesses gear up for a new year that continues to provide challenges to all organisations’, said the firm.
Cox Automotive is stressing dealers need to get used to a VUCA trading climate for the foreseeable future, and there’s no ‘quick fix’ back to a ‘previous normality’.
Philip Nothard, Cox Automotive’s insight and strategy director, said: ‘Since the coronavirus pandemic began, the automotive industry has been grappling to navigate the constantly changing headwinds.
‘The old days of retailers typically making a profit in Q1 and then focusing on maintaining profit in Q2 and H2 are gone. From manufacturers to independent motor dealers, businesses must acclimatise to a new norm.
‘Additionally, the use of digital has disrupted the industry, and so have changing market dynamics. What used to be seasonal norms no longer exist as everyone adjusts to a completely new trading climate.’
The company believes the ‘new normal’ for dealers in 2022 will be a focus on margin retention and profit, rather than chasing volume that isn’t there.
With demand likely to outstrip supply of vehicles for some time, Cox Automotive’s view is that the market will not return to pre-Covid norms.
Businesses must be resilient, continue to price cars correctly, market them properly, image and promote them properly, and make the best of the new norm
Nothard explained: ‘Over the past two years since coronavirus first took hold, dealers have learned new ways to derive a profit from retailing vehicles, and many have shown they can hold their margins even with increased values in the wholesale market.
‘There are also opportunities to make money even outside of normal trade values. These lessons hold many retailers in good stead, regardless of what 2022 throws at the industry.’
He added: ‘We will see the market softening in time, but there is no tsunami of product on the horizon for two reasons.
‘Firstly, because producers of semiconductors don’t expect normal conditions to resume until 2023 and secondly, because the types of vehicles entering the wholesale sector are not the same experienced in pre-pandemic times.
‘In the first days of 2022, leaders of businesses will be wondering how to get through another year of unpredictability. The advice of Cox Automotive is to adapt to VUCA and embrace change.
‘The expected rise in energy bills will continue to hit disposable incomes, there remains no end in sight to inflation, we will experience further digitisation of retail and digitally assisted sales, changes in the way OEMs retail new and used cars are accelerating, a rise of subscription/mobility products is imminent, and we will continue to shift to EVs as the year 2030 nears.
‘To adapt to this, businesses must be resilient, continue to price cars correctly, market them properly, image and promote them properly, and make the best of the new norm.
‘That way, their products will remain attractive to consumers, despite changing market forces in the background.’
