Former Lookers CEO and Inchcape UK MD James Brearley issued an optimistic take on the state of the UK motor retail market although he did warn of headwinds further down the road.
Posting on LinkedIn he said while dealers were operating in a flat economy, with challenging inflation and interest rates and rising fuel prices due to the Middle East Crisis, the market was still positive.
“The new car market year to date is up 10%, retail is up12.5%, the best August for 3 decades with 14% YOY growth and 19% growth in retail. Why? It is because private customers are trading down as well as up.
“Affordability is the new cool with Chinese entrants forcing Euro brands to fiercely compete. Monthly payments are looking low, after four years of inflating prices.
“Add in the frankly outrageous oil prices at the pumps and suddenly the market is fuelling (pun) demand for electric cars. It is as good as it gets.”
“The huge used car market remains ahead of prior year and used electric is hot. There is huge demand for servicing, as always consumers who can no longer afford to change their car maintain them. The smart retailers that increased the size of their productive workforce are reaping the benefits, look at Vertu numbers to see that.”
Brearley raised doubts about the trend to shift to longer four-year PCPs in order maintain new car sales.
Why is no one commenting on the enormous shift to four-year PCP he said which is now mainstream.
“Quietly to combat massive post covid price increases, car manufacturers have shifted from 24- month to 48-month agreements.
“Right now, 65% of advertised PCP offers are around four years. For two decades the model has been successful with 24–36-month agreements designed to protect circa 10% equity. That means that customer change cycles have been around 2.5 years.
“The market is locking out consumers for at least another year to fuel a short-term counter economic boost in sales. At some point that is going to bite with market contraction and that is when the bubble bursts and experience matters most,” he added.
