The reopening of showrooms across England on Monday may give the UK car industry a much-needed fillip but it is unlikely to endure, experts say.
In the short term, commuters worried about Covid-19 are expected to shun public transport and switch to cars as they return to work, and research by What Car? suggests nearly one-in-five buyers are looking to buy a car this month.
“There is certainly pent-up demand,” said Stuart Masson, editor of the Car Expert website. “Dealerships have been closed now for about 10 weeks, and hundreds of thousands of cars that would normally have gone out of the door haven’t gone.”
Sales of new cars in the UK fell by more than 97% last month as the coronavirus crisis shut showrooms and manufacturers shuttered factories. The Society of Motor Manufacturers and Traders (SMMT) predicts that there will be just 1.68 million new car registrations this year, the lowest since 1992. Normally, the industry would hope to shift about 2 million new cars a year while some 8 million second-hand cars might change hands.
But car sales were slowing even before the crisis, said Mintel automotive analyst Chris Hadley. “Low levels of consumer confidence in the face of continuing difficulties for the wider economy are likely to see many prospective buyers delay purchasing their next car,” Hadley said. “For those that do, price is likely to assume greater importance, placing further pressure on manufacturers and dealers, and consequently margins.
With a sizeable stock of quality used vehicles available, Mintel expects this sector of the market to be the one to initially benefit, with stronger new car sales not likely to be seen until further into 2021. This is bad news for the UK’s £200bn automotive retail sector, which employs 590,000 people and contributes £36bn a year to the public purse.
The SMMT estimates the cost of furloughing workers in the industry is £41m a day.
The executive director of Ford of Britain, John Gardiner, told CarDealer magazine that he is not expecting buyers to rush to showrooms post-lockdown. “No one should be expecting a rapid bounce back in customer demand,” he said.
Prospective buyers looking to snap up a bargain may be disappointed, Masson warned. “Some people assume it’s going to be a buyers’ market, and dealers are desperate to sell, but initially that’s probably not going to be the case. Dealers are struggling with not having a huge amount of stock. If you don’t have that many cars to sell and you’ve got customers queueing out of the door, there’s no great incentive to drop prices.”
The industry hopes the government will introduce a new scrappage scheme, as it did during the last recession.
But in the long term, the outlook appears far from rosy for the industry. “The longer lockdown lasts, the more people realise ‘well, I could ride to work or get the train’,” Masson said. “They will think, ‘I don’t need to be paying hundreds of pounds a month for a car I’m not driving that often’.”