Auto retail in 2024: is growth hiding the market's real health?

It’s already August, and with the first half of the year behind us, and with an abundance of sports related puns available, now is a good time to review how 2024 has evolved for the auto retail sector.

Now that the Euros are receding in the rear-view mirror, the focus can now shift to the outlook for H2. The Society of Motor Manufacturers and Traders (SMMT) registration statistics for July year to date (YTD) show a modest growth outlook, with the YTD performance being 5.5% up on the same period in 2023.

With the focus on the shift to EVs, what’s most interesting to me are the factors driving the 5.5% year-on-year growth.

It’s true that the market share for ‘good old’ Petrol or Diesel ICE vehicles has decreased, although combined, this is only 0.27%, or less than 2,000 registrations down year-over-year (YoY). A cynic (like me) might put this down to a wider spread of mild hybrid tech (the type where you’re told the starter motor functions as a hybrid system, though it’s not always clear how…) rather than a conscious consumer shift (you can’t buy what you aren’t offered).

What is clear, however, is that the increase in EV & hybrid registrations is just over 60,000 cars YoY, with each category - BEV (Battery) PHEV (Plug-in Hybrid) and HEV (Hybrid) - growing by 18,000 to 23,000 cars over the seven months. This growth can’t be attributed to one particular runner in the race.

Speaking to the retailers we work with, the year has been a challenge on new cars in terms of volume, ‘tactical’ registration exercises are starting to be seen again, and a lot of the registration in the retail market have been generated through channels such as Motability and via some attractive customer offers.

So, although the increase in registration is great, I’m not convinced it is a sign of health for the retail industry.

As a consumer (or a virtual window shopper like me) there are some great new car offers to be found on the lease comparison and ‘dealer new car offer’ sites, and as long as an individual you can get your head around the commitment a personal contract hire agreement brings (fixed term but no residual value risk), then even for a EV cynic like me, when you can get a brand new car with a modest rental deposit for less than £250 a month, then surely it might be time to consider the switch? Especially when the residual value risk on EVs is one of the obstacles to people adopting them as personally owned vehicles (and if you have access to another ICE or Hybrid for longer trips).

Over the past three years, we have shifted through several states of ‘normal’:

From manufacturing plants coming out of hibernation, and the retail new car market truly being demand led. “Agency is the future of car retail!!!”
To a state where demand was outstripping supply, artificially enhancing the prices of used (and new) vehicles.
To a state of oversupply, and coincidentally a slowdown in the push towards an agency regime.

I have long supported the role that retailers play in the new and used car retail market, whether it be education or facilitation of sales to the consumer. However, the one thing that is becoming apparent is that if the 2024 registration statistics have been achieved through the use of “tactical support” and pre-registration, and as we see a gradual tightening in the ZEV noose (decent article here from one of my colleagues here at UHY) I think one of the industries bigger challenges will be in 2025.

There is only so much that can be done to ‘push’ a market to perform, and as soon as the manufacturers struggle with the profitability of the EV product line, whether through manufacturing processes or as mandated by levies then they will also look to make further efficiencies within the distribution network.

At UHY, we’ve already observed this trend with the ‘ideal’ network plans that some brands have tried to implement in the UK over the past 18 months.

Agency was supposed to be a catalyst for network efficiency, but I think there is a very real risk the starters’ gun hasn’t been heard by the whole field.