Dealer margins are being squeezed as despite strong demand it is proving difficult to push retail prices up, according tp CAP HPI.
This is due to consumers cost-of-living concerns and high used car prices from increases since the start of COVID, and especially in 2021 when values increased by c.30% on average.
Plus there is strong competition from other physical and online retailers. When you factor in high prices to buy cars in the trade, there is an almost inevitable, albeit not calamitous, reduction in profit-per-unit.
Secondly, strong demand is firmly centred around internal combustion engine cars.
Days-to-sell has reduced from an average of over 40 days to under 30 days in February for these petrol and diesel models, and even some hybrids, but there is a different story for electric vehicles, which continue to be a struggle and are sitting at over 50 days to sell on average.
The consumer is not completely against the notion of “going electric” but there is a reluctance to take the plunge when considering cost to charge, range and purchase cost, all when compared to the traditional fuel-types.
Those EVs purchased by dealers in the final quarter of last year were bought for strong money, and when a reasonable margin is added, those cars now look very expensive.
Some tough decisions are being, and will continue to be, made to get them all sold, particularly as dealers that are buying EVs in the trade now, are doing so at far lower prices than three or four months ago, and some are advertising them far lower too.
Desirable cars that used to be £40,000 plus, are now below £30,000 and will appeal to the masses at those prices and if they have been bought direct from manufacturers, there can be other incentives in place too.
Those retailers that continue to hold high levels of EV stock from last year are, unsurprisingly, very reluctant to buy any more, at almost any price.
Used EVs were expected to struggle after concerns about recharging networks, battery life and residual values but the decision of Tesla to slash list prices earlier this year made the market much worse for existing owners and manufacturers who pitched their newcomers against Tesla and were left looking more expensive. Tesla has also announced this month that it will introduce a new cut price model with a new line-up, and that will add further pressure on existing models in the market, rivals and newcomers to the scene.