Hard statistics are at the core of anticipating shifts in the automotive market – a fact clearly understood by Christopher Wright, who heads one of the nation’s leading automotive data-collection companies in cap hpi. Wright speaks to Christopher Marchant about an excellent year in the used car market, and whether this is set to continue.
The used car market is enjoying rising demand, and pricing is on the increase as a result, according to cap hpi.
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Managing director Christopher Wright is also positive – yet cautious – about the condition of the used car market in 2019.
“2018 was an exceptional year for used cars. Dealers and consumers were looking for value, and this was coupled with a strong demand. We still see the used car sector remaining strong this year, but we anticipate a softening in the market.”
This “softening” is expected to inversely couple with a relative return to form for the new car sector, according to Wright. The introduction of WLTP emissions regulations on all new vehicles sold in the UK from September onwards critically affected new car sales, but indirectly aided used car sales in 2018. In terms of new car registrations, August 2018 marked a 16-year high for the month, but this was followed by a 20.5% fall in September.
“We deal with all of the manufacturers on an ongoing basis,” Wright explains. “We share data with them, and they are all working very hard in their own independent ways to cater to the requirements of WLTP. They are looking at how they handle the management of data, the implications of the vehicle and the emissions that defines.”
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By GlobalDataIssues over WLTP are linked to the actions of the UK government and its attitudes towards curbing emissions, and Wright would like greater clarity and reassurance in this department. Classification of benefits-in-kind relating to emissions is of high importance to businesses, and Wright expresses hope that this will be resolved in the next Budget.
Diesel Holding Steady
While there was a 6.8% drop in new car registrations in the UK market last year, the biggest volume decline was seen in the diesel sector, which was down by 29.6% in 2018.
“In spite of the fall in sales, the values of diesel cares are continuing to hold steady, and consumers are waking up to the notion that a modern diesel vehicle isn’t the hideous polluter that certain media and political figures have made it out to be. For particular consumers, diesel is still the natural and most economic choice,” Wright notes.
There was also massive growth in the electric vehicle market in 2018, up 20.9%, and Wright believes that this increase in units sold will continue significantly.
“The new generation of vehicles are more affordable, and they are being launched by more of the mainstream manufacturers.
“The whole concept of range anxiety has not completely cleared, but this is going to dissipate somewhat with a broader range of availability and technological developments. In the case of most franchise dealers, there is some form of electric offering coming out onto the market, and cap hpi has seen that consumers are opening their minds to it a little more. We are of the opinion that this will have an impact in terms of demand in 2019,” Wright explains.
There is, of course, another political consideration directly impacting the automotive market, and that is the ongoing Brexit negotiations. The automotive industry was identified by EY as one of the five industries most susceptible to impact in the event of a ‘no deal’ scenario.
“The lion’s share of vehicles produced in the UK are exported, and the majority of vehicles on our roads here we import – in the region of 80% one way and 80% the other. Any imposition of tariffs on this trade is going to have a notable impact,” says Wright.
“Aside from the potential of what’s going to happen on a macroeconomic perspective, this impacts the position of metal coming in and out of the country. A harder-to-predict effect on new vehicles is consumer confidence where, around big-ticket purchases of cars, Brexit uncertainty could also play a part.”
While external forces in the wider automotive sector will forever remain critical to the fortunes of UK motor financiers, there is also a case for cautious optimism in the sector. The strength of the used car market is not necessarily fading, and issues affecting new car sales such as WLTP are being gradually resolved – as are the numerous concerns over diesel.
Although turbulence should be prepared for – and perhaps even anticipated – by dealers and manufacturers alike, Wright remains convinced that 2019 still has the potential to be a good year for the automotive finance industry.
