Analysis: Are car sales bouncing back?

What about used car prices?

High demand and low supply – with auctions and trade-ins, as well as the cycle of lease returns, all having ceased in lockdown – has given some comfort to dealers who have had to sit on what would normally have been depreciating stock during lockdown.

The biggest risers are cars at the older, cheaper end of the market, boosted by buyers’ eagerness to avoid public transport. Cap HPI data suggests that some models have enjoyed price boosts of more than 20% from March until now.

At the newer, high end of the market, prices are more dependent on the desirability of the car, but there is still strong evidence of values holding firm for now, with Car Dealer Magazine even reporting Big Motoring World dealership boss Peter Waddell as saying that he could be in line for his “best-ever June”.

Are people buying different types of car?

What’s clear is that consumer intent has shifted – although it’s too early to say if this is being realised in retailers. As head of the Volkswagen Group in the UK, Alex Smith has a better overview of the market than most, but he’s cautious about being drawn on predicting trends based on four weeks of sales during the most turbulent period of his career. “We take it day by day,” he says when quizzed on changing tastes.

However, What Car?’s polling of buyers reveals that at its peak, during lockdown 49% of respondents said they intended to buy a more environmentally friendly car than they had previously considered, with 26% saying they were more inclined to consider a hybrid or electric car, and 9% saying they were more inclined to consider an electric car.

There is also evidence of a growing shift between those confident in their financial position and those less so: around a fifth of buyers are telling What Car? they now intend to spend more on their car than they did pre-lockdown and a similar number saying they intend to spend less. For those confident of employment, with low living costs and looking at low interest rates, the upside to the pandemic could well be a flashier new car.

Will there be a scrappage scheme?

A month ago, it seemed near certain that some sort of stimulus package would be introduced, with details being leaked to the press to test the waters, but the rhetoric coming out of the government has shifted dramatically over that period.

In a statement to Autocar, the Department for Business, Energy & Industrial Strategy highlighted its existing environmental incentives and said: “We have no current plans to change the existing incentives or to introduce a scrappage scheme.”

Contrary though it may seem, even that statement may provide some boost for car sales: What Car?’s polling suggests 29% of buyers were holding off in anticipation of a scrappage scheme. Knowing it is unlikely may push them to purchase anyway, rather than delaying in the hope of a better deal.

Of course, that statement also leaves wriggle room to change tack again, and there are alternatives to scrappage, including proposals for cars to be among purchases considered for a VAT cut.

However, with the aviation, hospitality and other retail industries in deeper trouble, and car retailers having already been given a head start in getting back to work, it seems more likely that decision makers will keep a watching brief. They will have a particularly close eye on France’s £7 billion automotive plan, including a near £12,000 EV incentive for buyers, which has pushed car sales there back within normal levels less than a month after being introduced.

What’s next?

Most predict the full impact of the coronavirus won’t start to unfold until September, but the truth is that nobody knows. Until then, the industry remains on tenterhooks, largely assuming that at some point a crash will become a reality as furlough unwinds and mass redundancies become necessary.