Automotive retail sector: January performs above expectations as consumer demand remains robust

Reports | Retail | Transport & Distribution

cars

According to the latest data from Auto Trader, despite the current restrictions across the UK, the car retail market performed above expectations last month, with most retailers trading at between 60-70% of usual volumes.

This better than expected performance in the context of lockdown and retailers closed to all but click and collect or home delivery, is reflected in the high volume of traffic to the Auto Trader marketplace, which in January (up to 28th) saw 53.6 million cross platform visits; an increase of more than 1.6 million compared with the same period last year. With a daily average of 1.3 million users in January, the particularly strong level of consumer engagement resulted in a circa 10% year-on-year (YoY) increase in the number of leads being sent to retailers.

Research by Auto Trader highlights the robust levels of consumer demand in the market, as well as the limited impact the latest lockdown measures are having on buying intentions.

An onsite survey conducted in January, revealed that consumers’ confidence in being able to afford their next car was at its highest level (8.68/10) since Auto Trader began tracking it in January 2020, surpassing the previous peak recorded in December (8.49/10), and even ahead of confidence levels recorded pre-pandemic (8.11/10 in January 2020). 45% of those surveyed said they were more confident than they were a year ago, up from 43% in December, and 45% felt about the same. 60% said the new restrictions had not affected their desired timeline to purchase.

Commenting on the performance, Auto Trader’s Chief Executive Officer, Nathan Coe, said: “Whilst we appreciate not every retailer is seeing the same positive levels of activity, it’s very reassuring to see and to hear anecdotally from many of our retailer partners that businesses are performing consistently way above the levels we saw during the first lockdown and at similar levels to the second. If the restrictions remain as is, we expect this level of transactions to continue, and potentially strengthen towards the end of the lockdown as we’ve seen previously. Overall, much as we saw when exiting the two previous lockdowns, we’re feeling confident the market will be in a robust position once the restrictions are lifted.”

The research also revealed the growing importance of car ownership as a result of COVID, with 49% of the circa 1,000 consumers surveyed believing that owning a car is more important to them now than it was before the pandemic, which is up significantly on the previous high of 35%, recorded in December.

What’s more, ever since the first lockdown we continue to see c.11% of on-site users who are in market to buy a car specifically to avoid public transport. This should provide retailers with confidence that the current consumer demand trends are likely to continue into 2021.

Used car prices remain strong as retailers hold firm

Average used prices remained exceptionally strong in January, recording a year-on-year increase of circa 7%, marking 10 months of consecutive price growth. This was driven by the robust levels of demand in the market, as well as some continuing supply constraints. Retailer activity has remained stable, and relatively consistent with same period last year, based on analysis of retailer pricing behaviour last month.

Last week’s average of 2,359 retailers making daily price adjustments is 107 fewer than a year earlier, and below the pre-lockdown average of 2,500 – 3,000. A total of 16,775 vehicles were repriced during the week, which is also below the typical levels seen during normal trading conditions (17,500 – 24,000). Pre-COVID-19, retailers typically lowered prices between £250-£550 per day. Last week, the average price reduction was £303, which is at the lower end of the scale. Evidently, retailers are choosing to hold firm, and with no signs of demand fading, there will be no reason for big price corrections or adjustments in the coming months.

Nathan continued: “The current performance is testament to how essential online retailing has become for many car buyers, and whilst many will no doubt enjoy the opportunity to visit showrooms and forecourts once retailers reopen, a significant proportion will still prefer to combine that with the convenience of digital for many more stages of the buying journey. It’s our ambition to support retailers with this transition, by providing the technology and tools they need to compete, and to help all of our customers access this growing audience, regardless of their size.”

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