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Car buyers may be waiting for better post-lockdown incentives - opinion

Michael Woodward, automotive industry leader at Deloitte

New car sales fell by 89% in May compared to the same period last year.

The decision to re-open showrooms has been welcomed as the industry is hopeful that pent-up consumer demand will accelerate recovery. There is early evidence to suggest that used car sales are showing signs of recovery and it’s possible that new car sales will receive a similar boost in the coming months.

Prior to COVID-19 fleet sales far outstripped private sales, but this month private sales made up 64% of total sales.

An uptick in business confidence will hopefully see companies invest in their car fleets again and return sales to pre-COVID levels.

The majority of dealers have acted quickly and decisively in order to open their doors this week. Safety has remained paramount, with social distancing procedures followed comprehensively by both staff and customers.  

Managing no-contact test-drives is emerging as a major issue for dealers, especially those who may not have considered the insurance implications associated with this practice.

However, we are seeing more online sales being conducted with no test-drives involved.  If this becomes more commonplace, then it would be a major boost to manufacturers and could see some brands accelerate their online sales.

Despite the optimism, there is still uncertainty around consumer behaviour; the economic uncertainty caused by the pandemic may cause people to think twice about making major purchases at this time.

Operational issues also have the potential to hamper the speed of recovery. For instance, purchased cars may be stuck in-situ as manufacturers try to ramp up production.

Similarly, the inventory that dealers have may not meet the specifications required by consumers – especially those who are looking for low cost alternatives to public transport.

During the previous economic downturn most European countries brought out scrappage schemes to boost sales. 

The majority of manufacturers will be offering big incentives to support early sales, but if the buying public believe there are further incentives to be had, this could stall vehicle purchases in June.

Author: Michael Woodward, UK automotive lead, Deloitte

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