Cox Automotive has predicted a stop/start recovery from the COVID-19 coronavirus outbreak for the automotive retail sector – revising its new car sales forecast to detail a 29% decline in 2020.
Publishing Cox's first analysis of the impact of Covid-19 on the wholesale and retail markets for new and used cars as well as LCVs Cox’s director of insight, Philip Nothard, suggested that new car volumes would decline to 1.67 million (previous estimate: 2.27m) as used car volumes fell 19% to (previous estimate: 7.99m) this year.
The COVID-19 pandemic has clearly moved up the agenda for car retailers and manufacturers following Cox's suggestion that the virus was among a series of “significant challenges” facing the automotive retail sector back in mid-March.
The automotive services company anticipates a ‘stop-start’ recovery for the sector with the remainder of 2020 “unlikely to return to any version of normality”.
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Cox also warned that pent-up demand could trigger an initial oversupply of vehicles into the market in May and June that could lead to a short-term spike in transactions before supply shortages “starve the market of new and used stock”.
Despite its impact on renewal cycles, consumer confidence, fleet rationalisation and personal mobility preferences, Cox said that it does not think COVID-19 will wreak long-term destruction on the economy in the same way that the 2007-09 financial crisis did, however.
Nothard said: “Covid-19 has created a unique set of political, economic and social circumstances that will define a ‘new normal’.
“The automotive sector is very unlikely to return to what we knew before the pandemic but there are positives to be found.
“Our informed consensus is that we’ll see a ‘W’ shaped recovery over the long-term, following the general path of the overall economy but with some notable deviations unique to our sector.
“Expect unusual things to happen with used prices as supply and demand imbalances work out.”
Nothard suggested that the new vehicle market would not return to any form of normality for some time as manufacturers work to restart their plant operations.
The financial impact of Covid-19 will inevitably see some OEMs change their strategy, with some projects stopped altogether and others accelerated to respond to new consumer needs, he said.
Consolidation will also take hold in the retail sector, he said, making his observations days after it emerged that merger talks between Pendragon and Lookers, which would have created the UK’s largest car retail group, had ceased.
“We’ll also see consolidation amongst the dealer sector accelerate as liquidity issues take hold for some, and consumers switch to digital channels far more quickly than was otherwise anticipated.
“Used vehicles will be the dominant revenue opportunity for dealers and OEMs for the remainder of the year.
“Looking further ahead, we believe we’ll see several factors having a bigger impacting upon the sector including the clean air agenda, remote working and mobility. All will influence how consumers choose and use their vehicles.”