Motor industry disruption not uniform, VRA AGM hears
25 July 2022
Author: Sean Keywood
The current disruption affecting the motor industry is having very different effects across different manufacturers, and even between different models in individual manufacturers' ranges.
That's among the industry updates given at the Vehicle Remarketing Association's (VRA) AGM.
One of the speakers, Lee Swinerd, automotive sector lead for financial advice firm Interpath, spoke about how new car supply issues were likely to continue to impact the used sector.
He said: "What we are seeing is an automotive industry facing a period of wholesale change that is perhaps unprecedented. This is causing not just supply shortages but liquidity and cost pressures, especially in the supply chain.
"It's important to realise that not all of these changes are uniform nor will they continue to be. Not all manufacturers have suffered the same from Covid, semiconductor shortages and the war in Ukraine - indeed, some have posted good financial results.
"Similarly, even within manufacturers there have been significant variations across different model ranges and, in turn, production scheduling and allocation of components have partly been affected by their desire to hit EU emissions targets.
"Life is perhaps especially difficult for suppliers to manufacturers, who are having to try to match operations and scheduling to very erratic levels of demand as production stops, starts and fluctuates."
Among the other speakers at the VRA's event was Auto Trader brand director Marc Palmer, who said that the major used car market trend over the next few years would be the ongoing impact of the two million 'lost' new car registrations seen by the end of 2022 compared to normal market conditions.
He said: "This means growth in the UK car parc will slow over the next few years, with fewer used cars available and within that a greater mix of older cars. We can already see that franchise dealers are stocking older vehicles and taking in more stock of other marques, so current market conditions are likely to continue.
"Another key trend to watch is electrification. Used EV volumes are increasing rapidly - to four times their current level by 2025 - which is starting to make them an important part of the market and planning should be accelerated."
Palmer added that while Auto Trader's measure of used car market health showed a decline compared with last year, it was ahead of pre-pandemic levels.
He said: "Supply is stable and pricing has evened out. Overall, those planning to buy are still buying, prices and volumes are stabilising, and things are returning to more normal patterns."
The AGM also heard from Alastair Cassels, head of automotive advisory at accountancy firm MHA, who outlined challenges facing car dealers from reduced margins and increased competition.
VRA chair Philip Nothard said that overall, speakers at the event had given an outline for the next few years that was highly challenging, but also exciting.
He said: "Consistent themes came through in the predictions of all three speakers - including electrification, the ongoing semiconductor shortage, the agency model and more.
"Of course, none of these were perhaps surprising in themselves but it was enlightening to see their potential implications spelt out in so much detail."
The AGM had originally been planned as an in-person event, but in the end it was held online after a late spike in Covid cases among delegates.
Nothard added: "We view the AGM as something of a showcase event for the VRA and while it was a disappointment to have to run the event digitally, the quality of the presentations was excellent, providing delegates with an outstanding overview of the current key trends affecting the remarketing sector."