In our 2021 Automotive Sector outlook we asked a panel of automotive experts for their views on how the landscape is likely to look for the sector through the rest of 2021 and beyond. Commenting on the market were UHY automotive experts, David Kendrick and Paul Daly, Swansway Group Director, Peter Smyth, Big Motoring World CEO, Peter Waddell, and Head of Research at Zeus Capital, Mike Allen.
Over the coming weeks we will be publishing extracts from the interview. To read the interview in full, download our 2021 Automotive Outlook and read our panel debate on page 22.
The move to digital
During the Covid-19 crisis, we saw how quickly the buying process can change towards click and collect to suit the external environment. However, our panel unanimously agreed that, whilst Covid-19 has undoubtedly triggered an acceleration in digital developments, digital will not replace the need for dealership visits and personal interaction. Mike Allen explained “the traditional dealership model has already undertaken rapid change that has become more digital, and will become increasingly personalised, targeted and intuitive to the consumer in our view. There is no doubt digital will continue to develop around enhancing the consumer buying experience and buying patterns, but we still believe this does not mean dealership visits are diminished from the process. As with everything, digital transformation will begin and end with the consumer in mind.”
David Kendrick injected “never have we had so much noise around the digital journey. Yes customers will be doing more research online than ever before, but I remain a believer that the dealership network is very much still needed, even though the number of representation points is likely to reduce.” Paul Daly agrees, adding “we have seen an acceleration, but a lot of it is due to lockdown. I believe it will settle at a natural level, with clients typically thinking around 25% digital will be the normal going forwards.”
Peter Smyth also thinks the industry has taken huge steps forward in the digital space over the last 12 months. He said “I welcome the disrupters as they have made us up our game. I believe it will ultimately help our industry. All the current intel is telling us that customers are prepared to deal online digitally, but they prefer a mixture of ‘bricks and clicks’, with a local dealer to visit and a chance to ask questions and view the product. I believe that if franchise dealers adapt to address the digital aspect of their business, as many have over the last 12 months, they will be well placed going forward.”
The response that surprised us the most came from Carzam owner, Peter Waddell, who commented that whilst lockdown helped the online businesses and moved the digital presence forward, he believes “people still like to buy a car in person” and he expects online sales to drop now showrooms are open again. Despite pumping £50m of his own cash into his new online car sales business, Peter expects most people will still want to “touch and feel” the product. He elaborated, “there is room for physical and room for digital; we have both. But there will always be a need for the traditional dealership model.” Concluding, Peter joked “you didn’t expect that answer from me, did you?”
Outlook for 2021 and beyond
Generally the consensus is that the remainder of 2021 should be a good year for the industry. Our panel expect strong demand and margins now showrooms are re-opened, with costs already under tight control and bolstered further by extended Government schemes. Mike Allen explains, ‘‘as restrictions lift, we would expect pent up demand to offset any weakness seen in the traditional March trading period. We think the PLCs are in good shape from a cost management and balance sheet perspective, and are well equipped to deal with the challenges this year will bring. I think companies will be happy to be on par with 2020 in profit terms, especially as Government support gets removed.” David Kendrick agrees, adding “at this point, I would expect businesses to be back on plan, however, I do worry what lies ahead in Q4 and 2022 as the Covid-19 impact really hits the economy.”
When it comes to planning for the year ahead, Paul Daly feels this it is something that is very difficult to do in such a fast moving environment. He says “I have been encouraging clients to do some more dynamic forecasting, rather than relying on plans that become rapidly out of date.”
Peter Smyth doesn’t intend to do anything differently. He explains “2020 was a great year for results and we expect a repeat in 2021. These results may come at different times of year, but we expect the overall result to be similar.”
On the other hand, Peter Waddell expects 2021 to outperform 2020. He said “staff have been in lockdown for months and they are hungry. We have some Rottweilers that want to get out of the cage. They want to get back out to work; their energy now showrooms have re-opened is electrifying! And people are ready to spend money. They haven’t had holidays or had anything to spend money on.”
Want to read the rest of the interview?
Download our 2021 Automotive Outlook and turn to page 22 to read the rest of the interview where our panel discuss whether the difficulties of 2020 changed the sector for the better, share their thoughts on the evolution of the high street and impact of Brexit, and much more.
Interview took place in March 2021.