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Used car supplies may never return to pre-pandemic levels, VRA warns

Date: 12 July 2022   |   Author: Sean Keywood

Changing car manufacturer strategies mean used car supplies may never return to anywhere near the levels seen before the Covid-19 pandemic, according to the Vehicle Remarketing Association (VRA).

The organisation's chair Philip Nothard said the last few years had taught at least some manufacturers that there were greater profits to be made from reducing supply and keeping new vehicle prices high - a strategy with inevitable knock-on effects for the used market.

Nothard said: "For decades, car manufacturing has been a volume business, not just for mainstream manufacturers but for prestige and even luxury brands, too. Building more was seen as the best way to make money.

"However, when supply was cut substantially during the pandemic, many car makers found that they were able to make equivalent or greater profits despite selling fewer units. Reduced volumes meant that they could keep prices higher.

"For at least some, this is now becoming a future strategy. While they do not want to strangle supply to current levels, with waiting lists of 12 months or longer for a new car, they do not want to return to the kinds of production levels seen pre-Covid."

Nothard said the impact of these strategies on the used market was likely to be significant, changing the availability of stock in the longer term.

He said: "Obviously, new car supply acts as the funnel to the used car market and if manufacturers reduce volumes permanently, used car supply will be affected.

"We're already in a position where reduced numbers of cars in the market have pushed up prices and values to record levels but there has been an assumption that the situation will ease over times and return to some kind of normality.

"However, it's perhaps looking less and less likely that this will happen. Yes, production will certainly rise but probably only to a level where the average new car delivery time is perhaps six months. A return to anything resembling pre-pandemic volumes seems unlikely, as far as we can tell."

According to Nothard, the only unknown variable is whether other parties will move into the space vacated by manufacturers who are reducing volume and take their place. 

He said: "These could be carmakers who have an existing presence or new entrants from China and elsewhere. It's going to be an interesting few years."