26 May 2021

The signs are positive for retailers in the coming months, even if things won’t pan out as they have in previous years

Showrooms may be open with restrictions and optimism lifting alike, but the industry is not exactly entering a period of familiarity.

Auto Retail Live gathered three experts to muse on what is behind the various oddities retailers are currently experiencing.

Darren Ardron, Perrys managing director, Paul Philpott, Kia UK president and CEO, and Nathan Coe, chief executive of Auto Trader joined Auto Retail’s Al Clarke – these were their conclusions.

1. Demand up across the board, but particularly commercials

Whereas the demand post lockdown one was driven by people wanting to get out of public transport and into affordable cars, this time around the impetus is across the board, says Nathan Coe of Auto Trader. “Certainly when we exited June last year there was a lot of talk about cheaper cars really flying off the shelves, now it is a little bit more balanced than it was before,” he said

As well as a desire for personal transport, which remains, this is also down to many people having saved cash over the last year without having gone on holiday.

However, the big boom is driven by a rise in the number of things we are having delivered to our doors, he adds, saying: “Commercial vehicles and vans have seen probably the most pronounced shifts. There are supply constraints there against strong demand.”

Darren Ardron backs this up, saying: “Quite frankly commercial vehicles are almost impossible to get hold of. We are taking orders on commercial vehicles that are showing delivery dates of 2022 and that is difficult for our teams as they are not used to that.”

2. Not everything is staying digital, yet

Consumers are looking for a purchase process that lets them do more online but are not avoiding going into a dealership, says Nathan Coe. He says that this suggests that the immediate future will be a blend of digital and physical.

“We are not going back. Those retailers who have jumped on that change will be the ones that do well when we get to a more normal market,” he says.

Darren Ardron of Perrys agrees, particularly with new technology on the way. “We are seeing our traditional customers who will do part of it online but you can’t test drive electric online. I think people will go so far and from what I am seeing, people want to see touch and feel.”

3. Supply issues not due to one reason alone

Paul Philpott, Kia UK president and CEO, acknowledged that the shortage of semiconductors that is causing issues in the new car supply chain is indeed a global factor in getting new cars to customers.

However, he pointed out that it is not simply a case of production being impacted by a part issue, saying: “We are having to manage every car line, the one that is most short is Sorento. New Sorento isn’t just about supply it is about demand exceeding expectations. We are facing longer lead times.

“We are in contact with head office with Korea stressing the need for more supply. When the customer is back out we want some priority.”

With lockdowns in other parts of Europe having gone on beyond the one in the UK at the start of 2021, there are other factors that could be adding to the factories’ workloads and stress levels. Expectation management could be a necessary skill for the months to come.

4. Used demand and RVs set to rise further

As well as a burgeoning new-car market, the popularity of used is expected to continue as 2021 progresses.

“It is difficult to put a figure on it but I think it could be a very strong used car year,” says Darren Ardron. Imagine if the used car had dropped last year, it would have been a horrible year. I think there will be good growth in used this year.”

Nathan Coe agrees, saying: “You have to reprice regularly, sort out aged stock. There are not many reasons why this year shouldn’t be a good one, aftersales to one side.”

Paul Philpott says that he thinks used cars will go shorter still, which will drive up demand and, in turn, help residual values.

5. Q3 and Q4 could be flipped on their heads

Darren Ardron echoes the view put forward by regular Auto Retail contributor Ian Allen, who has suggested that 2021 could be upside down, with busy periods coming at unusual times.

Darren says: “We have an adequate amount of stock around from a group point of view to deal with Q2. My view is we will probably see Q3 tighten up with certain brands but that [demand] could filter into Q4. One thing this pandemic has done is recalibrate the industry.

Normally October, November and December tend to be more sleepy months, but we could find it slightly more challenging in Q3 but we could see a strong Q4. We have to think about how we plan our businesses for that – not allow too many people to have holidays for Q4 for example. I think it will recalibrate the whole year.”

Tags: ARN Live, Auto Retail Live, Auto Trader, Kia, Perrys