Cox Automotive has adjusted its quarterly and full-year new car market forecasts in response to the latest insights across the automotive sector. While the company is confident, the industry is showing resilience by adapting and evolving in the face of adversity.
In the sixth instalment of its quarterly insight roundup, AutoFocus, Cox Automotive sets out upside, baseline, and downside scenarios to predict the best, middle, and worst-case outcomes for the new vehicle market based on currently available data. The company predicts that Q3 2022 will end on 471,565 registrations, a 19% increase year-on-year, but -25.7% down compared to the 2000-2019 average and -20.5% down compared with the most recent pre-pandemic 2019 performance. The best-case scenario for Q4 is 351,171 registrations, a 6.2% increase year-on-year, but -23.5% down compared to the 2000-2019 average and -21.8% compared to the most recent pre-pandemic 2019 performance.
Cox Automotive’s baseline scenario for Q3 forecasts 387,217 registrations, a -2.3% decrease year-on-year, -39.0% down compared to the 2000-2019 average, and -34.7% down compared to the most recent pre-pandemic 2019 performance. Q4 is expected to end on 329,055 registrations, a -0.5% decrease year-on-year, but -28.3% down compared to the 2000-2019 average and -26.7% compared to the most recent pre-pandemic 2019 performance.
In its worst-case scenario, Cox Automotive forecasts 346,939 registrations in Q3, a -12.5% decrease year-on-year, -45.4% down compared to the 2000-2019 average, and -41.5% down when compared with the most recent pre-pandemic 2019 performance. It estimates Q4 could end on 285,550 registrations, -13.6% down year-on-year, but -37.8% down compared to the 2000-2019 average and -36.4% compared to the most recent pre-pandemic 2019 performance.
It's a similar picture of the decline in the LCV market. Matthew Davock, Director of Commercial Vehicles, Cox Automotive, explains: "The UK's new light commercial vehicle market declined for the sixth consecutive month in June, falling -23.0% and rounding off a challenging first half of the year. A total of 144,384 new vans, pickups, and 4x4s were registered in the first six months of 2022, down by almost a quarter compared to the same period in 2021, amid the ongoing global supply chain challenges.”
Full-year forecasts downgraded for all scenarios.
A challenging year for automotive retail and several social, economic, and market pressures have contributed to Cox Automotive also downgrading its initial new vehicle market forecasts for the year. AutoFocus sets out an upside, baseline, and downside scenario for 2022.
In its upside scenario, Cox Automotive predicts the year will end on 1.62 million registrations, a -1.4% decrease year-on-year, but -29.7% down compared to the 2000-2019 average, and -29.7% down compared to the most recent pre-pandemic 2019 performance. This equates to a -11.3% downgrade on Cox’s previous forecast.
The revised baseline scenario for 2022 sees the year end on 1.52 million registrations, -7.8% down year-on-year, -34.3% down compared to the 2000-2019 average and -34.3% down when compared with the most recent pre-pandemic 2019 performance. This represents a -8% downgrade on the previous forecast.
Cox Automotive has downgraded the worst-case scenario for the year by -5%. As a result, the company expects to see 1.43 million registrations, a -12.9% decrease year-on-year, -37.9% down compared to the 2000-2019 average, and -37.9% down compared to the most recent pre-pandemic 2019 performance.
Green shoots of recovery, but challenges remain.
Philip Nothard, Cox Automotive’s Insight and Strategy Director explained that the company’s revised forecasts reflect a resilient market. It is slowly beginning its post-pandemic recovery, but with a cautious and nervous approach as several headwinds potentially lie ahead.
“We’ve been consistently commenting on the sector's headwinds for some time, and retailers and manufacturers respond resiliently. However, we must be realistic about the reality of the situation; new car production issues continue to affect most manufacturers, and there is a considerable shortfall in vehicles entering the market,” he explained.
“Although we believe output will increase as time goes on, this will certainly not make up for lost vehicles. Therefore, it remains unclear whether we will ever reach the c. 90+ million vehicles produced yearly again.”
Nothard also notes in AutoFocus that lost production units are affecting the UK and the rest of Europe. The UK, Germany, France, Spain, and Italy have lost more than 6.5 million new vehicle registrations over the last 24 months. A further 1.1 million were lost in the first quarter of this year alone.
In the middle of a push and pull market
The result of these headwinds is a constantly changing automotive retail market. While some manufacturers focus production on profitable, premium models, others are more volume focused. OEMs are also increasingly enhancing their electrification efforts to meet demand. One Covid hangover the sector is not likely to see, however, is further factory closures since these can be more expensive than opening new production sites. Consequently, in a market where output is likely to be reduced for the foreseeable future, further collaborations between manufacturers are being formed to maximise efficiencies and production.
Nothard hinted as to what the future of the market looks like. He explained: “Regardless of the types of vehicles manufacturers choose to produce, there remains a big question around the future of the new vehicle market: will it be push or pull? Will we return to a high-volume market with lots of pre-reg and tactical activity, heavy de-fleet programmes, and unattainable targets, or will we remain demand driven as we are today?
“Financials from the sector at both the manufacturer and retailer level indicate how profitable the demand-driven market has been for the past two years. Still, some commentators believe that the industry won't learn, and as soon as supply improves, we will return to old ways.
“The reality, in my opinion, is more nuanced and is likely to be somewhere in the middle. But, as ever, one size does not fit all, and while some businesses will return to what they know, others will remain demand-driven with a focus on profitability.”