A change in auto manufacturers’ selling strategies prompted by Covid means used car supply may never return to its pre-pandemic levels, according to the Vehicle Remarketing Association (VRA).
“For decades, car manufacturing has been a volume business, not just for mainstream manufacturers but for prestige and even luxury brands, too. Building more was seen as the best way to make money.
Go deeper with GlobalData
Philip Nothard, chair of the VRA, said that the last few years had taught at least some manufacturers that there were greater profits to be made from reducing supply and keeping new vehicle prices high.
“However, when supply was cut substantially during the pandemic, many car makers found that they were able to make equivalent or greater profits despite selling fewer units. Reduced volumes meant that they could keep prices higher.
“For at least some, this is now becoming a future strategy. While they do not want to strangle supply to current levels, with waiting lists of 12 months or longer for a new car, they do not want to return to the kinds of production levels seen pre-Covid.”
Nothard said that these strategies were likely to have a significant impact on the used car sector, changing the availability of stock in the longer term.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData“Obviously, new car supply acts as the funnel to the used car market and if manufacturers reduce volumes permanently, used car supply will be affected.
“We’re already in a position where reduced numbers of cars in the market have pushed up prices and values to record levels but there has been an assumption that the situation will ease over time and return to some kind of normality.
“However, it’s perhaps looking less and less likely that this will happen. Yes, production will certainly rise but probably only to a level where the average new car delivery time is perhaps six months. A return to anything resembling pre-pandemic volumes seems unlikely, as far as we can tell.
“The only unknown variable in this situation is whether other parties will move into the space vacated by manufacturers who are reducing volume and take their place. These could be car makers who have an existing presence or new entrants from China and elsewhere. It’s going to be an interesting few years.”
Nothard added that the remarketing sector is facing several challenges and reduced volumes are certainly one of them. “It’s probably only now that it is becoming clear how much volumes are reducing and what the long-term situation will look like.”
The VRA was established in 2010 by senior executives from companies involved in all aspects of remarketing used cars which between them manage more than 1.5 million used vehicles every year.
Used car price growth softens but up 41.5% on pre-Covid levels
