Plan Insurance Blog

Motor Trade Predictions for 2021

Well 2020 was a year like no other and not one we’re keen to repeat in a hurry! That said, 2021 hasn’t exactly got off to the brightest of starts. A second surge of Covid has resulted in a 3rd lockdown and tragically the death toll from the pandemic keeps rising. Amongst the madness, motor traders need to keep running their businesses. So, we look at what the year might have in-store for the market. Hopefully we can give you a steer about what to expect.

Covid to Drive up 2nd Hand Vehicle Values Further

Richard Walker director of data and insight at Auto Trader has provided some positivity amongst all the gloom. He believes that the “tighter restrictions rolled out across the UK throughout December had little impact on the levels of consumer demand.” Sales being limited to click & collect and home delivery isn’t putting off buyers.

The online dealer platform is also optimistic about values. Analysis of approximately 900,000 vehicles advertised in the final month of 2020 on the site is revealing. The average value of a typical used car was £14,085. On a year on year and like for like basis that works out at an increase of 8.1%. December experienced the 9th consecutive monthly increase and completed an overall increase of 4% for the year, up from a meagre 0.5% in 2019.

The prospect of supply shortages and resilient consumer demand explain the rises. Autotrader evidences the latter claim by reporting an 11% jump in visitors to its site compared to 2019 numbers, and December was actually up 20%. With that strong finish in mind, Walker urges traders to trust the data and “hold firm on values” in order to benefit from “much stronger margins.”

Tesla’s Bubble to Burst

January 2021 saw Elon Musk become the world’s richest person with a net worth of $185bn (£136bn). This was off the back of Tesla’s market value jumping to $700bn. The company has been described has having an “iron grip” on the electric vehicle market. And its brand carries an almost cult like status. 

This fanaticism reflects itself in the share value. But how long can it last? A number of experts have highlighted Tesla as a clear sign of a bubble in the stock market. They point out that its value works out at $1.25 million per car sold each year. To put that into perspective on the same basis General Motors shares are trading at just $9,000 per car sold.

Many tech reviewers rave about Tesla’s in car technology but a large number of petrol heads question the drivability and build quality of the vehicles. Surely 2021 will see traditional manufacturers powerhouses getting their acts together on the EV front? A number of alternative electric models are set to be launched in 2021. They should surely make inroads into the American firm’s substantial head start. There’s also a hot new player from China called Nio whose share price is sky rocketing off the back of promises that it can deliver a 450 mile range amongst other benefits. And surely Apple’s rumoured link up with Hyundai on an EV will have even the ice cool Musk slightly worried?

EVs to Kick On

The combined sales figures of battery and plug-in hybrid electric cars made up over one in 10 UK vehicle registrations in 2020. That total increased from one in 30 during the previous year. That performance is even more impressive when you consider it was set against an incredibly turbulent back drop for the new car sales market. And consumers will benefit from numerous exciting EV models to choose from in 2021. Amongst many others, due to launch in 2021 our highlights include: BMW’s IX, Cupra’s El-Born, Ford Mustang’s Mach E and Mercedes-Benz EQS.

Buyers are also ever more concerned about the environment. So with the Government supporting that with its “Green Agenda”, winter appears to be coming for the internal combustion engine (ICE).

Brexit Impact on New Car Sales

We’ve celebrated how the UK Motor Trade came out on top in a Brexit based battle between cars and fish. The Society of Motor Traders & Manufacturers (SMMT) were at least satisfied that the trade deal avoids EU tariffs on exported vehicles from the UK to the region. Though with so little time between the deal being agreed and becoming law the seamless transition might not be so seamless. The resulting red tape is already creating backlogs at ports before volumes hit anywhere near their peak periods. These supply chain issues may at least be short term but its likely there will be increased freight and administration costs long term. There could even be a combination of delays and increased costs on new vehicles.

And Brexit hits in a period of extreme difficulty for the economy. 2020 saw the new car market drop by almost 30%. Sales figures plummeted to a low not reached since 1992. Impatient consumers or those seeking greater value might plump for the immediate supply of a nearly new vehicle instead of one with zero miles on the clock? There is also the possibility that 2021 will see new car buyers keep their wallet in their pocket altogether whilst the financial storm rages.

Online Vehicle Sales to Soar

Autotrader stats have already demonstrated that click & collect and home delivery restrictions aren’t putting off buyers. And last month we looked at the performance of 3 online motor trade mega brands that launched in 2020. With huge investment and big ambitious they are determined to shake the used car market up.

The 3rd national coronavirus lockdown appears set to further accelerate the shift to purchases in cyber space rather than physical forecourts. Smaller scale traders should be able to use their entrepreneurial instincts and find ways to compete.

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