By Rupert Pontin, director at Cazana
September can be a fickle month overall for the retail sector at the best of times and specifically for the Automotive Industry.
The arrival of the new registration plate means that franchised dealers tend to be focussed on new car sales rather than generating used car business.
This makes life a little more difficult for the non-franchised car dealers who often find that retail demand has increased but the volume of available used car stock is short for the first few weeks of the month until part exchanges and ex contract hire and leasing cars find their way to the wholesale market.
This year to date has been interesting to say the least and it seems that September 2019 has been no exception.
The new car market recorded an increase in sales of just 1.3% which was a surprise for many that had expected volumes to be higher given last years artificially low market following the WLTP implementation.
However, the indicators have been there for several months pointing to the fact that pre-registration has been increasing and supporting an ailing market severely hampered by the Brexit fiasco.
Diesel registrations were down by 20.3% and Petrol up by 4.5% and the confusing Battery and Hybrid classifications show a healthy increase in registrations across all types with MHEV Diesel (Mild Hybrid) and BEV being the types most in demand in the new car market.
Looking at sectors and Private Registrations remained consistent in comparison to the same period last year although Fleet business recorded an 8.6% increase in volume.
It will be interesting to understand whether this was long term fleet activity or short term registrations to rental fleets keen to change cars that had aged further than normal due to restricted new car stocks earlier in the year.
It is widely acknowledged that certain manufacturers have been offering some quite outstanding discounts to clear old technology cars.
On a slightly different note the stalemate that the current Government finds itself in having had the ability to stand firm and negotiate with Europe taken away by the opposition who appear too timid to allow an election for reasons of little substance, it comes as a surprise to see that consumer confidence levels have improved a little over the previous month.
This could be read in two ways the first being that it is a delayed response to the election of the current Prime Minister and secondly it could be because the country is now legally not allowed to leave the EU without a deal.
Whichever it is, the positive news for the used car market has been an increase in the number of customer enquiries and for some an improvement in footfall on the pitches.
With an increase in footfall and demand, deals have been slightly easier to close although there is still some way to go before the used car market could be described as good again.
What is of significant note is the change in the shape of the stock that is on sale and the impact that this has had on the retail pricing and as such the shape of the wholesale market and the demand and remarketing required to keep stock moving and maintain a sensible return on the asset value.
The chart below shows the performance of retail pricing on the used car market at key age and mileage profiles against the same period over the last three years:-
Data powered by cazana.com
This is a very interesting chart and it is immediately clear that the UK used car market has seen a significant shift in pricing in the sub 12-month-old sector.
Retail pricing has seen a marked decrease with a 7-percentage point downturn over the same period last year.
This is entirely due to the impact of pre-registration in recent months with significant impact evident during September as these cars forced into the market have had to be competitive with brand new cars when advertised for retail sale.
There is no doubt that this is a serious event for this market profile to experience.
Looking at other age and mileage profiles and the market is in a far more stable condition with a drop-in pricing of 3 percentage points for 24-month-old vehicles and 36-month-old vehicles both with ex PCP mileage profiles.
This drop is likely due to such a heavy move in the sub 12 months sector although it is important to acknowledge that at this point there is pricing stability for ex fleet 36-month-old vehicles with the higher sixty-thousand-mile profile.
Given the severity of the pricing decline in the sub 12 month sector the chart below looks at this age profile in more detail:-
Data powered by cazana.com
This chart is fascinating as it highlights the current advantage of working with realtime retail driven insight.
The chart adds more context to the previous data by showing that it is the petrol-powered cars that have suffered so heavily in pricing terms.
Since September 2018 petrol propulsion pricing in this key age and mileage profile has been on a gentle decline but the September profile highlights a 14-percentage point decline over the same period last year and 9 percentage points since August 2019.
Looking into the context of the raw data and the average cost new price has increased by 17.5 percentage points and the volume of cars in the market has increased by 18.5 percentage points.
This implies not only greater pre-registration but also increased change of perhaps rental fleets or manufacturer car schemes and demo fleets.
This will have been done to clearing cars with less clean emissions and engine technology than new legislation allows.
It also lends credence to the commentary suggesting that consumers don’t have the desire for higher priced larger engine petrol cars that the manufacturers “think” they want.
In summary, this month’s retail data has highlighted the impact of the government legislative changes on the UK automotive industry.
The need to keep cars moving has had a very serious impact on the sub 12-month-old profile and arguably led to a reduction in pricing for older lower mileage used cars.
It will be interesting to see how this may impact on the UK and European markets in the coming months.
Cazana’s truly live retail-driven data is unique in providing up to the moment market insight and intelligence being driven from over 25,000 websites each day in the UK alone.
Seeking more focussed information relating to specific market sectors or time periods ensures maximum vision and the most comprehensive insight required to maximise profit, ROI and asset management.
With market conditions shifting and the used car market becoming more of a challenge, top quality up to the minute commercial data identifies market variations quicker than any other data provider and will be vital to ensure modern automotive organisations are in a position to make the most effective strategic decisions.