Stock shortages emerge as the biggest worry for car dealerships in the UK

Stock shortages emerge as the biggest worry for car dealerships in the year ahead, according to new research from Close Brothers Motor Finance.

The Dealer Satisfaction Survey found that almost a third (31%) of motor dealers see the lack of stock availability as the biggest threat to their business, with the global semiconductor shortage having a significant ripple effect on the motor industry.

Despite UK lockdown restrictions lifting, the pandemic continues to wreak havoc across the globe. The semiconductor shortage and the repercussions of restricted manufacturing continues to stall the new car market but sees car buyers flocking to the used car market instead. Demand is high, with the SMMT reporting the used car market had its best second quarter – growing 108.6%, with more than 2.2 million vehicles changing hands.

The chip shortage, coupled with increased demand, has driven up raw material price significantly, posing unique challenges for car dealers as they battle with online car sellers for business.

Dealers also cite the coronavirus recovery or the prospect of another as a continued threat, with well over a quarter (28%) stating it’s a concern, whilst the economic downturn and unemployment is a threat for one in ten (10%) dealers.

Despite the threat of lack of stock availability, dealers appear to have an overall optimistic outlook for the short-term future, with well over half (59%) of dealers saying that they feel ‘completely confident’ about the next six months.

Seán Kemple, Managing Director of Close Brothers Motor Finance, said: “While we may start to see the semiconductor shortage easing up, the industry impact has been severe. There is a limited choice of vehicles that people can order right now, which in turn is channelling consumers toward searching elsewhere for the car that they want.

“Smaller dealers may have trouble keeping their doors open due to stock challenges. The increased demand contrasted with limited supply is driving the industry into difficulty, and there’s a real possibility that a domino effect could cause the second half of the year to be even more volatile.

“Used car dealers face some difficult choices in the current climate. Consumer demand is high, but amidst big supply challenges they’ll need to think carefully about how to stock their forecourt, and how they’re pricing their vehicles during a volatile period. In this environment it’s also essential that dealers are digitally-adept, continuing to improve their online showrooms so that customers can research their options from home. While the industry looks forward to recovery and stability, customers will rely on the trusted advice of dealers when shopping around for their next car.”

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