Car Industry COVID-19 Recovery: Used Prices Rise & Demand Steady
UK motor industry recovery report: used prices rise, new car registrations fall, and demand ‘steady’ in June 2020.
In June 2020, the UK motor industry took its first, small, tentative steps to recover from coronavirus shutdown, the Cazana Monthly Pricing Insight Report implies. It therefore says that the retail pricing of used cars rose ‘marginally’ and consumer demand was ‘steady’. In contrast, demand for new cars was far lower than June 2019 (1 year earlier). Let us consider the report’s key facts.
Used car prices rise
The retail pricing of used cars ‘increased marginally’ across the whole market, the report confirms. Not by much, though. It only increased 0.03%. Whereas this is small, some people feared there would be very little demand following lockdown. However, whereas retail pricing increased overall it fell in some ranges. See below:
- £0 to £9,999: +0.72%
- £10,000 to £19,999: -0.55%
- £20,000 to £29,999: -0.02%
- £30,000 to £39,000: -0.52%
- £40,000 to £49,999: -0.04%
- £50,000 to £69,999: +0.27%
- £70,000 to £90,000: +0.46%.
This overall price rise is interesting. Why? Because retailers might have been tempted to slash prices to encourage motorists – many of who had less monthly income than typical – to purchase vehicles. However, the report suggests this would have backfired long term as it is now tricky for retailers to replace their stock.
It says: ‘Bar the odd exception, retailers did not drop their retail pricing to drive sales. The reality is there has not been a need to do so. Also, the difficulty in replacing sold units has meant that price reductions may have brought a short term boost to cash flow, but resulted in a lack of cars to sell.’ Such a strategy might therefore have been ‘short sighted and counter-productive’.
New car registrations plummet
New car registrations were very low in June 2020, the report confirms. Only 145,377 cars found homes compared to 223,421 in the same month the previous year. That was a fall of 34.9%. ‘The question is was this because of a lack of new car product or because the consumer was more interested in a used car’, the report asks?
Drivers buy cars quicker thanks to social distancing
The report also confirms that the motor industry took quick, decisive steps to minimise the spread of coronavirus as its showrooms reopened. These included social distancing, timed appointments, and letting motorists take unaccompanied test drives.
Interestingly, these steps also appeared to reduce the time motorists spent deciding whether to buy. Staff spent less time ‘handling objections’, for example (reasons not to purchase). Presumably, such parties were keen to minimise any time spent in close physical proximity. So, that was June 2020. The motor industry now waits with baited breath to see how it does this July.