18 January 2021

With the challenging business conditions, retailers remain concerned about new car sales over the next six months, and more now believe we will see increased forced registrations to make up the shortfall, with OEMs beginning to raise targets once again.

These are some of the findings of the latest Auto Retail Barometer survey, conducted in partnership with Chrysalis Loyalty. The spectre of a hard Brexit and tariffs might now be behind us, but retailers are still expecting Covid and a depressed economy to drive a further decline in new car sales.

A number of respondents bemoaned unfair target setting, with one telling us: “The manufacturers have their heads in the sand regarding the size of the market.” Trying to force the market will inevitably lead to increased reliance on pre-registrations to hit targets, and some 56% of respondents believed levels of forced registrations would be up in the first half of 2021.

For others, the transition to EV and the learning curve behind that transition is a significant issue. Also with EV, there are concerns among retailers that the OEMs will try to force the market.

With new car sales down through 2020, it was the used market that provided a beacon of hope for the industry, and there is optimism that this will continue through the first half, at least, of 2021. That said, there are familiar problems of finding the right stock at the right prices, and a lean new car market last year is only going make it harder to find late stock.

Aftersales was a key contributor to profitability in 2020, but here, too, retailers have concerns for the next six months, with many having seen a fall-off in bookings through the November lockdown and expecting demand to remain subdued in the early part of this year. And it is not just a question of access; retailers also report that customers “are tightening their belts”.

In addition, with servicing and repairs in particular, there are ongoing challenges in the pandemic around how businesses manage their teams to be able to provide a good level of service while keeping people safe.

Finance regulations

In an additional question for this iteration of the Barometer, we asked retailers what impact they anticipated the new FCA regulations on commission payments to have on their business. Some 56% of respondents believed it would negatively impact their finance sales profitability and only 6% felt the changes would lead to greater finance sales profitability.

They noted, however, that access to finance is a key enabler for car sales, but highlighted the challenge of integrating this into the purchasing process at an earlier part of the journey.

The finance aspect also impacts on customer satisfaction, which remains a key area of concern for retailers. Customer satisfaction has always been a critical area to manage, but the Covid crisis has made it even harder to manage expectations, keep everyone safe and still deliver an outstanding experience.

Even while acknowledging that these are difficult times for everyone, it seems customer expectations are reaching ever higher levels. Services from retailers such as collect and deliver have helped, but there are costs associated with these services that impact on profitability. There are also concerns that uncertainty over new car pricing will have a knock-on effect on customer satisfaction.

It would seem that very few concessions are being made by the OEMs with regard to customer satisfaction, and some retailers reported that the level of support received from their manufacturers was poor.

Staffing concerns

Staffing remains a challenge for many retailers, and in particular keeping teams Covid-free is an ongoing battle. For some, the need to split teams so that there is back-up in the event of a Covid outbreak is making it difficult to maintain some aftersales activities in particular at pre-Covid levels of efficiency, or is impacting on lead times.

While some companies have had to make staffing cuts, others say that, surprisingly, they have been able to retain all staff. But even there, the mental stress of lockdown is beginning to take its toll.

Here again, the levels of recognition from the OEMs have been questioned, with one retailer saying: “We have a slimmed down team working harder than ever, but it’s not appreciated by the manufacturer.”

Online activity

Showroom visits have been declining for some time, and retailers expect them to continue to fall over the next six months, with over 43% of respondents anticipating a decline. But that is offset somewhat by expectations for increased web traffic, with almost 74% of respondents anticipating that website visits will increase in the first half of this year.

However, as businesses increase their online presence and activity, with an emphasis of moving sales online, managing this new channel and responding quickly to enquiries is a growing challenge.

The online challenges extend to the third-party marketing activities, with more third parties emerging all the time, all aiming to be disruptors in the market. Many retailers are concerned that the competition is unsustainable, while one told us that the market is “becoming saturated and increasingly expensive.”

Many retailers told us that managing cost versus return is an ongoing challenge, with one admitting: “I need to be smarter with my spend.”

With all of these challenges to cope with through the first half of 2021, it is perhaps unsurprising that retailers are expecting profitability to be impacted. Over half of respondents expected that their profitability would be flat or down through the next six months.

The Auto Retail Network Barometer survey was conducted in partnership with Chrysalis Loyalty

Tags: aftersales, Auto Retail Network, Barometer, Chrysalis Loyalty, economy, new cars, profitability, registrations, Used