Insight June 2020: Car Market post-COVID

Insight June 2020: Car Market post-COVID

As I write, the UK’s coronavirus lockdown is easing and the retail shutdown is lifting, with car showrooms now open across the UK. All sorts of economic predictions are shared in the papers, but much of the doom and gloom I have read has not been borne out across the used car market, and for classic cars and bikes in particular. But what about new cars?

The latest data from the Society of Motor Manufacturers and Traders (SMMT) makes for interesting reading. A look at SMMT month end figures shows the scale of the lockdown effect. Total new car registrations for April were just 4,321 units: a year-on-year drop of over 97%. May was a little better, with 20,247 registrations taking the total year-on-year fall to less than 90%: a clear demonstration of how quickly canny dealers adapted to trading conditions and took negotiations and sales online, supported by contactless handovers.

While June’s figures are yet to be revealed, it is reasonable to expect a sizeable bounce in the year-on-year data. Anecdotal evidence in the dealerships I visit as part of my valuations business suggests good news on sales – the most recent visit was to a Ferrari dealership where they are struggling to find enough cars to meet demand – and every daily dog walk brings another new 20-plate spotted. The SMMT data certainly highlights the UK’s love of prestige brands in ways one might not have expected.

Traditionally the busiest month of the year for registrations, March was also the first month where the pandemic effect could be noted. A total of 254,684 cars were registered for the month: down 44.4% year-on-year but, as the shutdown did not come until later in March, the year-to-date (YTD) total was down just 31%. By the end of May, the YTD total had shifted to a fall of over 50%.

While the 2020 market to date has dropped by over 500,000 cars, a casual look through the fence at some of the larger import centres – Bristol, for example – suggests there is plenty of stock on the docks, and dealers report good activity. But the registration data shows that the market is changing and premium brands may have some exposure to manage.

If the nature of a premium brand includes some measure of exclusivity, current market shares are much bigger than one might expect. Manufacturer share of the private sales market is largely powered by finance agreements: a precarious position to occupy in the midst of an economic downturn.

Exploring May registration data shows BMW registrations at just under 36,000 units: some 7% of the market. The share is broadly similar to Audi at just under 7% and Mercedes Benz, who were a little ahead of BMW. Only Ford and VW had bigger market shares: roughly equal on circa 9% market share each. So Audi, BMW and Mercedes outsold the so-called volume manufacturers including Toyota at 5%, Vauxhall at just under 6%, Skoda at 3% and Renault at 2%. One might wonder how 7% of a market reflects brand exclusivity. Only Alfa Romeo shows serious rarity, with 0.22% of the market in May and a long way to go to match its market leading targets.

Looking at drivetrains as a percentage of market to date during May, diesel cars were down from 26.7% market share in 2019 to 17% market share in 2020. Petrol cars were down from 64% market share to 55% market share, but Battery EVs were up from 1% of market share in 2019 to 12% of market share in 2020: an increase in registrations of over 20%.

While total BEVs sold is still a small number, this pronounced trend in a reduced market space chimes with the shifts in social conscience (or at least in virtue signalling) that started to play out during lockdown. It fits with several conversations I’ve had with middle-Englanders, many of whom have suggested they would be ditching their premium and performance cars and switching to greener equivalents. This is particularly evident amongst those who have worked very effectively from home during lockdown: why maintain a big company car and big tax bill when a shift in working practices could make a BEV more effective, most if not all of the time?

What happens through the rest of 2020 will be interesting. While some economic fallout is inevitable, it remains to be seen just how severe that will be. Evidence during the first three months of the COVID experience suggests that there is money available and many people are not yet so badly strapped that they feel the need to cling on to it.

Some consumers will shift their short-term buying criteria based on personal experiences as a result of the lockdown, but how many people will shift their entire consciousness, changing their long-term consumptive behaviour? And how many businesses might shift their policies to cut their corporate emissions and overheads while simultaneously supporting new personal goals for employees? These are fascinating and somewhat optimistic questions but, as with the empathetic improvements that permitted the rapid adoption of widespread social distancing and powered overnight shifts in global awareness on issues of racial equality, the answers may be delivered much sooner than expected.