With circa 75 million cross-platform visits each month, and representing circa 14,000 automotive retailers, at Auto Trader, we have a privileged view of the market. With a new year already underway, before 2023 disappears completely in the rearview mirror, I thought I’d share a quick reflection on last year, and our outlook for the year ahead.
EVs: supply, demand and pricing
I think 2023 will be remembered as a landmark year for several different reasons, not least electric vehicles, and the steep softening in pricing we saw. The sudden oversupply of vehicles entering the market, fuelled by the de-fleeting of the circa 750,000 EVs sold over the last three years, resulted in used retail values falling circa 20% year-on-year in 2023. The enticing combination of better affordability (with many models reaching price parity with their ICE equivalents) and greater accessibility saw demand for second-hand EVs reach record levels towards the end of the year. Whilst supply growth has eased, consumer demand has remained robust, and as a result, we’re seeing positive signs of retail prices stabilising.
We can expect EVs to again play centre stage this year and have a huge impact on the new car market in particular, which faces a challenging combination of new regulatory targets, increased competition from new entrants, and slowing retail sales. As a result, significant discounting and finance offers to stimulate consumer demand – particularly for electric models – will continue this year, which we predict will fuel a 4% growth in new car sales: from an estimated 1.89 million in 2023, to circa 1.97 million in 2024.
Strict ZEV mandate regulations will require 22% of all brand sales to be zero emission this year or face a fine of £15,000 for every non-compliant vehicle sold. However, the current average share of EV sales across brands is just circa 16%, and for some, it’s as low as 3%. The recent softening in retail EV sales, which in November were down 29% versus 2019 and accounted for only 1 in 10 of all retail sales, further underlines the need for more offers to stimulate demand in the market next year.
2024: Used car market
Despite the economic strain on UK consumers – inflation, interest rates, and potentially, a general election – we’re confident robust used car demand will continue in 2024 and result in a small market uplift. We predict transactions will increase to an estimated 7.24 million sales, up from the circa 7.17 last year.
Potential market growth will continue to be hampered by the 3 million ‘lost’ cars that weren’t sold between 2020 and 2022. Although it began to slowly return in 2023, stock levels on Auto Trader were up just 2% on December 2022, and with significant variations across different market segments. Indeed, the volume of cars aged up to a year old has increased 32.2% over the same period (albeit down circa 50% on 2019’s levels), whilst those aged 1-3 and 3-5 have fallen -10.5% and -7.3% respectively.
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No crash in sight
With supply constraints set to flow through the market for years to come, and with our consumer sentiment metrics pointing to sustained levels of demand (78% of people plan to buy in the next six months, and eight in 10 claim to be feeling at least as confident as last year in their ability to afford their next car) we don’t see any necessary reason for retail prices to drop significantly anytime soon.
There are reasons to remain positive about consumer demand for cars overall this year. We’ve seen record-breaking levels of engagement on our marketplace over 2023, which translated through into used car transactions, and with our consumer sentiment trackers continuing to point to buyers prioritising car buying over other categories we’re confident for another robust year for consumer demand, and overall sales.