Oversupply could begin to push the new car market back towards the kind of peaks seen in the mid-2010s, members heard at a meeting of the Vehicle Remarketing Association.
However, a return to nearer 2.5 million sales would be unlikely to represent real demand and would generally be accompanied by poor unit profitability for dealers, the event at BCA Birmingham was told.
In a panel discussion on the state of the UK automotive retail sector, Mike Jones of Fresh Track Holdings, explained: “When we saw those record highs, sales were being powered by oversupply. It was a false market that was created by manufacturers pumping stock into the new car market.
“The question is whether that will happen again and the risk largely comes from Chinese new entrants. If you speak to those businesses, several are aiming for annual sales of 100,000 units each. Add those to existing legacy manufacturers and we’re talking much higher volumes meeting unchanged demand.”
Philip Nothard, chair at the VRA, said that rising pre-registrations were a signal that an issue could be arising, “After being subdued for recent years, we are seeing high levels of registration at month ends, which is always a danger. It’s a sign that manufacturers are making too many cars for real world demand, and is also forcing dealers into refocussing on new volume sales, after some years of concentrating on more profitable used activity.”
Mike Allen, managing director of Cambria Private Capital, added that the key to understanding the mid-2010s record markets was that they were not a time of high profitability for dealers. “If we started to approach those numbers again, similar problems are likely. In fact, the most profitable time for dealers in recent years has been when new car supply was at its lowest. Those big sales volumes don’t represent actual demand for new cars, which we think is roughly where the market is now, around 2.0.-2.1 million units.”
However, while the new car market was potentially hotting up, the used sector was showing welcome signs of stability, the meeting heard.
Stuart Pearson, chief operating officer at BCA, went on, “This is probably the most normal used vehicle market we have seen for some time. LCVs have stabilised after some ups and downs last year and we have reached a point with EVs where there is some pricing volatility but ready demand. The mood of the market is positive.”
Chris Plumb, head of current car valuations at cap hpi, said, “We tend to view 2019 as a benchmark year because it was the last time we saw a customary pre-Covid used vehicle sector and what we are seeing today are seasonal price movements in line with that kind of market. Demand is healthy and the market is in a good place.”
Members also heard a presentation on AI in the remarketing sector from Oliver Philpott, co-founder of battery health check specialist Generational, discussing how remarketing businesses could start to make the most of the technology.
“We advise people to start by just having a play around with the AI tools available and that will quickly give you an idea of its potential. You could do something as simple as using it to create a priority list for the tasks you have to do today, which could give you a good idea how AI is structured.
“Generally, for remarketing businesses that want to use AI, there is very good potential for cases which you are data rich, have repetitive, pattern-based tasks, where successful outcomes can be measured quantifiably, and there is some tolerance of imperfection.”
Finally, as part of its new partnership with CARA, the car remarketing association of Europe, the meeting heard a presentation from Grainne van Berkum, president of OPENLANE Europe.
She said: “There is much potential for swapping experiences between our organisations and gaining new perspectives. For example, we don’t have a vehicle grading system in Europe of your type but would like one and similarly, we are more advanced in adoption of an electric vehicle battery health check regime.”
The event also included the VRA Annual General Meeting (AGM), where members heard about the organisation’s activities over the last year, its current financial situation, and re-elected four board members – Marcus Blakemore, Cliff Deller, Philip Nothard and Gary Xuereb.
Philip Nothard said: “The VRA is in good health. Membership numbers have increased in recent years, engagement is much higher, and we believe that our influence is growing across the sector. This is a valuable place of discussion and information for anyone involved in remarketing.”
