Car Market Tracker - November 2021

Cox Automotive monthly market tracker for October 2021 shows:

• Caution setting in, but no cliff edge on the horizon
• Slight falls seen in key wholesale figures at Manheim
• New car recovery hit by another crisis

The wholesale vehicle market has shown its first signs of easing for several months. However, Cox Automotive is warning businesses that a return to normal figures will take months if not longer.

Philip Nothard, Strategy and Insight Director at Cox Automotive, said: "We need to remember that we are in a seasonally slow period; however, although many retailers are increasingly cautious, they will require stock for the New Year. Within the results, the EV sector is showing signs of strength. Indications are that economic uncertainly and seasonal easing on demand will result in similar data for the next few months, as supply shortages and new vehicle constraints will remain in the short term.

"There are reports of key volume buyers holding back, and dealers will need stock for the new year January demand, but there is no tsunami of stock on the horizon. The increasing volumes of nearly new vehicles above the original cost of new is a factor why the trajectory of trade price increases observed since April of this year has shown signs of levelling."   

The comparisons are clear when October's year-on-year results are observed. Wholesale key indicators for October 2021 saw the average first-time conversion returned below 90% on the previous month to 88.2%. However, the year-on-year figure was an increase of 8.2%. Similarly, the CAP Clean figure returned below 100% to 99.7% in October. The average age of cars sold increased by 14.2% to 102.8 months, and the average mileage increased again by 7.2% and up by 4,630 miles to 69,330 miles.

The ongoing new car market disruption continues to impact the used car market dynamics at auction. Used car values continued to rise in October across Manheim's auctions, with the average sold price increasing by 13% or £841 month-on-month, to £7,324.

A new threat for new car market

The new car market continued to suffer throughout October 2021, showing the weakest monthly performance since October 1991. Data from the Society of Motor Manufacturers and Traders (SMMT) show a fourth consecutive monthly fall in registrations, with a decline of -24.6% to 106,265 units compared to the same time last year.

Nothard summarised: “New car market performance is extremely weak compared to the pre-Covid level over the past few months. We are really starting to see the negative impacts of semiconductor and raw material shortages now. This is one contributing factor, but we do know that demand is subdued and consumer confidence has worsened. GfK’s primary purchases index fell to -10 in October, from -6 in September; both below its long-run average of -1.”

Nothard continued: "Supplies continue to be challenging for most manufacturers, but it is worse for some than others. There are reports that some manufacturers have sold their total 2022 allocation, whilst others have built slots available for Q1/2 2022, depending on whether the consumer is willing to forgo specifications such as heads-up display, touch screens, and other items continue to be scarce due to semiconductor shortages. 

"Sadly, supply shortages look set to continue, with global magnesium shortages now affecting several vehicle manufacturers, as a key material for aluminium."

Cox Automotive's 2021 annual Insight Report highlights the 2021 year-end results and the full 2022/23 new car forecast. It downgrades the Society of Manufacturers and Traders' (SMMT) July forecast for 2021's new car market from 1.8m to 1.6m sales. The average amount of new car sales between 2007 to 2016 was 2.26m per annum. The Insight Report forecast for 2022 is at 1.8m. For the following year, 2023, the Insight Report forecast is 2.09m.

The UK new vehicle market is not the only one to have suffered a decline in October, with material shortages affecting the entire European market. The best performance was seen in Spain, albeit a 20.5% drop in new registrations year-on-year, and a 37.25% drop compared to pre-pandemic levels. France recorded a 30.7% decline year-on-year, with German and Italian market performance dropping by 34.9% and 35.7% respectively.

EV’s a beacon of hope

A small beacon of hope for the new car market came in the form of plug-in vehicle uptake, with battery electric vehicles (BEVs) equalling their September market share of 15.2% with 16,155 units, while plug-in hybrid vehicles (PHEVs) grew to 7.9% or 8,382 units.

The trend towards EV is also taking place in the leasing market, after recent speculation that Tesla has agreed to supply 100,000 Model 3s to Hertz, one of the world's largest car rental companies. This signifies a growing appetite for electric vehicles (EVs) within the rental market and will likely lead to strategic growth within the EV sector.

Nothard added: "Tesla’s speculated 100,000-vehicle order potentially signals a real desire for the fleet world to move away from internal combustion engine vehicles.

"This comes on the back of the last month's UK best-selling new car results released by the Society of Manufacturers and Traders (SMMT), where the Tesla Model 3 was the best-selling car in one of the two most important months for the UK automotive industry. This clearly signifies the acceleration of the electric vehicle marketplace."

Uber has also committed to 50,000 Tesla's being used in North America and Europe by 2023. This is part of a commitment by the mobility company to reaching their goal of only running EVs by 2030.

Nothard added: "We are starting to see signs of EV market growth, which is handing a lifeline to the new car industry and very slowly beginning to alleviate pressures in the used vehicle market. However, although there are signs of encouragement, we must remember that we continue to operate in exceptional circumstances and are by no means out of the woods yet."