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Paragon warns of automotive supply chain pressure

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Paragon Automotive is warning of unprecedented pressure across the vehicle supply-chain as new car sales continue to hit records.

The March plate-change is expected to see a new record for the month, with manufacturers targeting retail buyers after seeing retail sales fall back in February when fleet registrations accounted for 58% of the market.

Commenting on the trend, Mike Pilkington (pictured), managing director of Paragon Automotive said: “From capacity at the docks to logistics and de-fleet, the automotive supply chain is facing unprecedented demand. New thinking is required if the supply chain is to cope with increased demand without significant investment.

“Record levels of PCP on shorter term contracts, and increased volumes through other short cycle routes to market, mean that new strategies are required to help manufacturers and dealers handle larger volumes of nearly new and two year old vehicles without affecting new sales.

“Our industry contacts tell us that daily rental volumes are up 31% year on year. Our own facilities are experiencing volumes at a seven-year high. These volumes can be accommodated if manufacturers can work with the supply chain to innovate and use new technology to work smarter.”

Paragon Automotive argues the current peak in volumes of new vehicles is a sign of a structural shift to new models of vehicle ownership that manufacturers will want to maintain even when new car sales in other automotive markets across the globe improve.  

The company has developed a software solution that allows production capacity to be matched to manufacturer defleet forecasts over the year. This enables both more efficient workshop capacity and transparency when production will exceed or fall behind stock turn targets.

Pilkington continued: “The continued rise in various forms of personal finance will drive a faster churn in the vehicle lifecycle. This will demand more flexible de-fleet and remarketing strategies to help retailers cope with the volumes.”

Figures from the Society of Motor Manufacturers and Traders (SMMT) show that the UK new car market has grown for a 36th consecutive month – a record growth period. In February, traditionally one of the quietest months of the year ahead of a number plate change in March, the market grew 12.0% year-on-year with 76,958 new cars registered, achieving a year-to-date rise of 8.3%. Fleet buyers drove this increase with registrations up 19.9% in February, while the private market saw an increase of 3.4%.

The UK car market’s sustained expansion is the longest ever seen, beating the previous record of 26 months set in the late 1980s. The number of new cars registered has risen every month since March 2012, as the UK continues to bounce back from the recession and consumer demand has been driven by exciting new products and attractive finance deals.

Paragon Automotive provides new car inspection and PDI, vehicle preparation, delivery and customer handover and de-fleet services.

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