The motor trade media is reporting news of busy forecourts, online car sales both new and used performing strongly and car prices on the increase. A number of retailers have indicated that they are likely to produce higher year on year trading figures for June 2020. However, the factors behind the buoyed performance will determine whether these results are sustainable in the longer term. We look into what might be driving these strong numbers?
In England, car dealers returned their work palces on June 1st. Many were met by 10 weeks of pent-up demand that had built during lockdown. Enquiries that had been received during that stressful and frustrating period could now be converted into sales. Though this factor will hato ve had less of an impact on those dealers that managed to continue trading remotely during lockdown via a click and collect service.
By all accounts online car advertising sites are experiencing exceptionally high visitor rates with the like of eBay motors, What Car and Auto Trader stating that demand from consumers is strong. Auto Trader has revealed that used car leads have increased a whopping 95% compared to 2019’s levels. This level of boom would indicate that we’re not going to see a bust happening in the immediate future.
Deferred New Car Registrations
Though many new car registrations have been deferred from April and May and are now being completed in the month of June. So this could be inflating the new market figures upwards somewhat.
Cramped Carriages and Busy Buses
The increased demand could be the result of high volumes of new buyers entering the market seeking a used car as an alternative to taking public transport. Therefore, an unexpected beneficial outcome of the pandemic, which virtually crippled the industry during lockdown, could be a glut of sales enquiries from a fearful segment of the commuter market. Perhaps people have been using money received from cancelled trips abroad to fund the purchases?
As with the new car registrations, there will have been a large number of customers whose PCP expired during the restricted period. Due to the fact they wouldn’t have been able to use a new vehicle and weren’t keen on purchasing off screen without a test drive, a large proportion of these consumers will probably have held off purchasing a replacement. Now all those customers are looking to renew their cars and in doing so are perhaps helping to boost June’s sales figures in a manner that won’t prove sustainable.
It’s easy to overlook the fact that before Covid-19 struck the motor trade market was in self-declared turmoil due to potential issues caused by the ongoing Brexit negotiations. As a result June 2019 was by no means a stellar month of trading to compare against and that may be making this year’s results look more positive.
Regardless of all these explanations, from a very bleak outlook for the industry based on performance from March to May, June could actually turn out to be a respectable month in terms of sales for many motor traders. However, 1 in 6 automotive jobs remain at risk potentially of redundancy when the job retention scheme comes to an end according to the SMMT. So, the question now is how long will this first flush of enthusiasm last? Will the initial rally fade fast as 10 weeks’ worth of sales have been shoe horned into one month or will July onwards confound the neigh-sayers and continue in a rich vein?
A lot will also depend on: how quickly the remaining lockdown measures are relaxed, if the country endures a second spike on Covid-19 cases and if the gradual winding down of the furlough funding scheme leads to unemployment numbers spiralling followed by a deep, dark recession. With so much uncertainty we shall be concentrating on the positives whilst hoping for a strong and sustained recovery.
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