Cox Automotive Market Insight Overview – September 2019

Retail - summary

• September delivered ‘modest’ 1.3% registration growth. Noteworthy combining August & September over the 3 years, 2019 Aug/Sept increased 0.7% (2,900 units) whilst comparing with 2017 the result was -13.3% (-66,775 units)
• UK Consumer Confidence improves two points to -12 for September 2019 on the run-up to October 31^st, albeit 3 points lower than the -9 in September 2018
• 62% of dealers reported that retained margins had declined Year-on-Year. The Modix survey also revealed a very mixed picture on demand, with just under half of dealers reporting that demand had fallen YoY, while 39% said it had stayed the same, and 15% saw an improvement
• Dealers were upbeat about used car sales, with 80% confirming that overage stock was the same or lower than last year, while 86% reported that days in stock had reduced or stayed the same
• 76% of dealers cited stability or improvement over the economic condition over the coming months whilst half are anticipating little or no change to sourcing stock over the coming months in Q4, as indicated in the September Monthly Market Survey
• September was a difficult month for the retail sector as dealers looked to the used car market to off-set challenges in new
• A lot of influences have come together to create a perfect storm in the new car market. Uncertainty around Brexit has created nervousness among OEMs and fleets, while the impending introduction of CAFÉ
• (Corporate Average Fuel Economy) targets will see manufacturers hold back some of their lower emission vehicles
• The general consensus is that September started well but the second half of the month was weaker
• Order banks are growing for new cars, without confirmation of delivery in some cases. European manufacturers are preparing for worst-case scenario on Brexit and preparing price lists that include tariffs
• Company cars are sticking to the usual treadmill without much in the way of extensions or early terminations beyond normal levels

Retail 2019 Outlook

• Increasing appetite for Manufacturers and Dealers to embrace eCommerce
• Demand grows for advanced vehicle imagery solutions to drive online buyer confidence
• Dealers investing in PPC advertising to drive sales as consumers turn to online for their next vehicle

Wholesale - summary

• Manheim figures reveal that average age and mileage increased slightly month-on-month (up 1.3%), while the average price held steady at £5,679 (up 0.3%)
• Wholesale stock profiles in September show an increase in age and mileage for the second consecutive month, following a year’s low in June and July
• 85% of dealers reported that time taken to complete reconditioning work is the biggest delaying factor in getting a vehicle on sale, according to the results of Manheim’s latest dealer sentiment survey
• Data from Manheim reveals a dip in fuel prices for all categories except electric when compared to the same month last year
• The top 6 positions remain static for the most vehicles sold in wholesale for September, whilst the Nissan Qashqai drops from 7^th to 10^th, BMW 3 Series into 7^th and Audi A3 up to ninth place
• Figures indicate an uplift in demand for electric vehicles, but the relatively low volume of electric vehicles, when compared to other fuel types, means that higher percentage swings are likely
• Manheim, a leading provider of integrated products and services for the vehicle remarketing sector, saw more than 87% of cars sell first time across the month, with most achieving or exceeding the guide price
• A number of factors have combined to reduce the level of stock in the wholesale market throughout August and September. Low new-car sales, long lead-times, and scrappage schemes from some manufacturers have reduced part-exchange volumes, and dealers are choosing to retail those that they take indirectly
• Wholesale demand exceeded supply, putting pressure on retailer’s margin targets and forcing dealers to sell decent part-exchanges
• Average fleet car price held steady MoM despite a +35% increase in average mileage

Wholesale 2019 Outlook

• Demand for retail-ready stock will drive efficiencies in-vehicle services, assisted by enhanced imagery
• An increasingly agnostic approach to physical and digital sales streams will emerge to complement changing buyer behaviours
• Buyers will expect increased transparency to drive stock confidence, leading to more detailed vehicle descriptions and assurance checks

Funding - summary

• NextGear Capital, the leading provider of wholesale stock funding, also saw average age and mileage hold relatively steady but reported an average price increase of 6% MoM to £7,762
• The average number of days in stock increased to 63.3 (60.8 August 2019 and 59 September 2018), increasing the average 61.7 days during 2019
• The average age and mileage increase marginally YoY in line with data observed through the wholesale sector. As mileage rises to 60,277 for vehicles bought using the NextGear stock funding plan. It also saw the average age of its funded units increase from 5.8 in 2018 to 6.1 years

Funding 2019 Outlook

• A strong appetite for growth means cash flow remains a priority for dealers
• An increased focus on digital integration is helping dealers to purchase stock-hassle free from a variety of sources
• Ease and flexibility remains key for dealers