What does 2021 look like for car retailers?

Having survived the slings and arrows of 2020, car retailers will be prepared for just about anything in 2021.

With the known challenges already starting to stack up in the shape of more Covid-19 restrictions and Brexit, here’s Honchō’s guide to what could shape the opening months of the New Year.

More lockdowns?

While the rollout of Covid-19 vaccinations are cause for celebration, the car retailing sector is bracing itself for a challenging first quarter with the likelihood of further disruptions caused by the pandemic.

Mark Lavery, the CEO of Cambria Automobiles, the franchised group which operates the Doves, Grange and Motorparks brands, told Car Dealer Magazine plans were already in place for further restrictions should a post-Christmas spike occur in January.

“We’re working on the basis there could be a Lockdown 3. We hope there isn’t but we have to be prepared for the worst,” he said.

If Lockdown 3 comes, then dealers have already demonstrated how they can still operate online with showroom doors closed to buyers.

2020 saw an acceleration of a trend towards offering online car buying services. Twelve months ago these online services were only operated by a handful of carmakers and retailers, now dealer groups of all sizes have digital services empowering customers to go online and transact.

Marshall Motors launched an online car buying service some years ago but found the uptake so low it removed the buy button, meaning buyers needed to complete transactions in its showrooms. However, CEO Daksh Gupta, recently confirmed to me the button will be reinstated as part of the group’s new look website, confirmation that some – not all — customers will want to transact digitally.

The Post-Brexit World

From January we’ll also start to see what life outside the EU actually looks like, especially if a trade deal is not agreed by the end of the Brexit transition period which ends on 31 December 2020.

The automotive sector is already braced for disruption in the supply chain.

Earlier this month Honda paused manufacturing at its Swindon plant for several days because of parts shortages caused by delays and congestion in UK ports. While Bentley, facing the same issues, took the unusual step of chartering five Antonov cargo jets to fly in components to keep its production lines rolling in the event of a disorderly Brexit.

Without a deal, there will almost certainly be disruption to new car supply, even for those vehicles built in the UK, as parts will still need to be sourced from the EU.

New car price rises

A no-deal is also likely to see a 10% import tariff applied to new cars, the default World Trade Organisation terms. The Society of Motor Manufacturers and Traders has previously warned that such a levy would equate to the average cost of new cars rising by £1,500.

Furthermore, the carmaker trade body expects electric cars to be hit even harder, with a £2,800 increase in their prices

January tends to be the month when manufacturers release their new price lists. But rather than doing that on top of tariffs, they are expected to hold fire on price rises until the March plate-change, the biggest month of the year for new car sales.

According to Automotive Services International, car brands and their finance houses are likely to soften the blow for buyers by either increasing monthly repayments, deposits, APRs or optional final balloon payments — or a combination of all these measures!

Used cars still in demand

With supply and price pressure on new cars, dealers can expect heightened interest in their used stock, especially if they have desirable nearly-new cars to offer as alternatives.

March will certainly see a welcome influx of three year old cars enter the used market as a result of PCPs maturing following the 474,069 cars registered in March 2018.

Meanwhile, the wholesale market is preparing for high volumes of fleet cars, currently running on extended contracts, because of this year’s Covid-19 disruptions, entering the used market and being snapped up by dealers keen to replenish their online and physical forecourts.

Maintain your online activity over the festive period

Clearly with so many external factors coming into play, car dealers need to be focused on what they can control over the coming weeks and months.

That means maintaining a strong digital presence.

• Websites need to be optimised
• Paid for campaigns need to be in place
• Stock listings need to be kept up to date

This Christmas will be quite different to anything we’ve experienced before. But some things will remain the same.

Boxing Day is traditionally one of the busiest days for online retailing. This is the day consumer attention turns from opening presents to making purchases, especially those in the market for a car.

With tiered restrictions in place across the UK, internet shopping this season will provide a much needed tonic for consumers.

So, make sure your digital channels are working hard throughout the holiday period to enable you to start 2021 as strongly as possible.

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