By Philip Nothard, chair of the Vehicle Remarketing Association (VRA) and insight and strategy director at Cox Automotive.

Many of the changes we’re experiencing in the market result from key trends that we have been discussing for several years.

While the short-term influences we’re experiencing accelerated the pace of change, the direction of travel is something we’ve been anticipating for some time.

Furthermore, the factors impacting the sector today, such as the semiconductor shortage, the war in Ukraine and the cost of living, are short-term impacts, and in time will pass.

In 2018, global light vehicle production stood at just less than 96.9 million units. In 2019, it dropped slightly, to almost 92.2 million.

In the first year of the pandemic, light vehicle production worldwide dropped precipitously to just 77.7 million units, and production recovered somewhat in 2021, but only to 80.1 million.

So, when we add up 2018 and 2019 and compare that figure with 2020 plus 2021, the global automotive industry has produced approximately 31 million fewer vehicles.

Although we believe production will gradually increase over the coming years, it will certainly not make up for this loss, even if we return to the 90 million units annually.

The top five European markets registered 6.5 million fewer vehicles in 2020 and 2021 compared with the previous two years. And indications are a further 1.1 million were lost in the first quarter of this year alone.

Today’s new vehicles are tomorrow’s used, so it stands to reason that as we move forward, we’ll begin to see further pressures as the impacts of this shortfall become evident.

The pressure is being felt most keenly in the zero-to-six and sub-12-month market. But as time goes on, we will begin to see this affecting other age segments starting with the one-to-three-year sector over the next 24 months.

But, the effect of shortages will inevitably trickle down to the late three-year and eventually to the three-to-five-year market.

The current economic factors are likely to last for at least the next 12 months, and with consumer confidence in decline, we are likely to see a reduction in the number of units sold this year.

These factors combined are causing a realignment in used vehicle values, and prices in wholesale and retail markets are softening.

We’ve been warning that the significant rise in used vehicle values was unsustainable, and it looks like the end is in sight. But while prices may be easing, the lack of vehicles entering the market means they aren’t falling off a cliff.

The fundamental question is: Will the future of the new vehicle market be ‘push’ or ‘pull’? Will we return to a market with high volumes of pre-registrations, much tactical activity, heavy de-fleeting, and unattainable targets?

Many commentators believe this is the case and that OEMs haven’t learned their lesson. When supply returns, we will again become a ‘push’ marketplace.

However, I believe some OEMs may return to volume, as it’s the business model they understand best. Others will remain driven by demand and, therefore, by profitability.

The emergence of a ‘pull’ market over the mid- to long-term would have a significant effect on the used-vehicle market as well: as scarcity moves from the primary to the secondary lifecycle of vehicles, residual values are likely to go up.