Market Tracker - September 2022

• New car market shows signs of marginal improvement with year-on-year growth of +4.6%
• Used vehicle demand strengthens, with further supply shortages on the horizon
• Encouraging increase in conversions and price performance
• Rising living costs continue to dampen consumer confidence

The mounting pressure of rising living costs is predicted to directly impact the automotive sector, with most 2023 forecasts downgraded to reflect expectations of further supply challenges. However, the message from Cox Automotive in its market tracker for September 2022 is that wholesale demand remains encouraging.

New registrations at odds with consumer spending power 

Despite UK registrations hitting 225,300 in September, a 4.6% increase on the same period in 2021, they remain below (34.4%) pre-pandemic figures from 2019. Yet, as private sales have declined by 3.6% YoY to 116.2k, fleet sales secured a much-needed 12.5% YoY boost, and business purchases trumped all sectors with a remarkable 70.5% YoY jump.

Philip Nothard, Insight and Strategy Director, commented: “This further decline in new registrations in September has proved unsurprising, considering the GfK consumer confidence index tumbled to a new low of -49, as households grapple with surging CPI inflation and more expensive car finance costs.
Europe faces the same challenges
 
European new car markets are suffering similar challenges to the UK. Sales and fulfilment of order banks experienced year-on-year growth in September yet remained significantly down on pre-pandemic levels, and 2023 forecasts have been downgraded to reflect ongoing production shortages. 
 
Germany improved by 14.1% YoY but was still down by 8.1% on 2019 figures, whilst France only edged upwards by 5.4% - 18.6% lower than in 2019. Italy rose by just 5.5% YoY, 22.2% lower than in 2019, and Spain achieved an increase of 12.7% YoY but remained 17.8% below 2019 levels.

Wholesale performance on upward trajectory

September proved to be one of the busiest months of the year for the wholesale vehicle market for conversions and price performance. This reaffirms the market’s strong position amid a period of imbalanced supply and demand, with cap clean performance reaching 98.19%, a 1.94 increase on 2019.  First-time conversions continue to reflect constrained stock levels, at 86.6% for September, which is 2.1% ahead of 2020 results. In addition, average age and mileage remain behind 2019 levels as retailers continue diversifying stock profiles. 
 
The decline in new models has culminated in a burgeoning demand for used cars. This and retained margins have provided much-needed light relief in the sector. However, the escalating provision is at the mercy of supply issues, constraining potential sales. As a result, values at 3yr/60k at cap hpi increased marginally by 0.3% in September, following a drop of 0.3% in August, with the market remaining static during this period. 

Physical auctions offer silver lining

The recent launch of Manheim’s full hybrid auction sale programme has helped to improve numbers for the month, enabling buyers to combine the experience of physical auctions with the convenience of online sales. However, Nothard added, “Dealerships are advised to remain cautious, as they have been throughout 2022. Unfortunately, consumer spending power has not yet been restored and will likely be negatively impacted as we move into the winter months.  However, the used market offers a flicker of hope with neither prices nor demand likely to drop, whilst lack of supply remains.”