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 past three weeks, we have been publishing extracts from the interview. To read past extracts, please use the related insights panel on the right or download our 2021 Automotive Outlook below and turn to page 22 to read the full debate.
When asked whether Brexit had affected business the overwhelming response was a simple “no”. Mike Allen went into detail, explaining “the FX dynamics have not changed post Brexit, which is a positive, and it was clearly beneficial that there were no direct tariffs. However, the long term consequences are less clear, but we think the UK will always be a strategically important market for most OEMs, and providing sterling remains robust should remain an active market.” Peter Smyth agrees with Mike, adding that the “British market is too big a player for European OEMs to ignore.”
The future of EV
Asked for their latest view on EV and the consensus this year is that EV is finally gathering pace following the Government’s announcement that the sale of new petrol and diesel cars is to end by 2030.
Peter Waddell thinks the growth of the EV market will increasingly pick up pace over the coming months and years “as more people get to know about it and get comfortable with it”. He revealed electrification is a big focus for him personally this year, as well as his companies, stating “I believe it is going to happen. We want to be involved in it and be one of the first.”
Peter Smyth also thinks electrification is undoubtedly coming and he highlights the millions OEMs have invested into the development of EVs. However, Smyth thinks the speed of evolution will largely depend on the supporting infrastructure. Mike Allen agrees, foreseeing “some challenges in terms of affordability of vehicles and infrastructure that will probably come under the spotlight in the next couple of years.”
Paul Daly predicts that “more of these products will be made under license, in the same way as many other consumer goods are. This will bring production costs down and make it difficult for those that don’t evolve to compete.”
David Kendrick reasons that there is a lot still to do to make the 2030 deadline a reality. He says “it wouldn’t surprise me if the 2030 date changed again. Diesel and petrol cars will be around for some time after that as well. The market is changing, yes, but the consumer still appears to be very wary of electric and the lack of infrastructure in place as it stands.”
Peter Smyth concludes “Government have some big questions to ask. Their biggest problem is about how to generate the income they have enjoyed on petrol and diesel sales if they really are going to meet the target to replace the sale of these vehicles with electric. I wonder if electrification is a stepping stone towards hydrogen at the pump, with duty payable on that?”
Used car values to remain strong
The final question to our panel of experts was about used car values and their predictions over the coming months.
Despite concerns at the start of the year that an end to the ban on the repossession of vehicles by finance companies due to missed payments could lead to an oversupply of cars on the used market in 2021, all of our experts expect used car values to remain buoyant in 2021, with some predicting that values will go up. Paul Daly explained “we are still seeing restricted supply, caused by the dramatic reduction in registrations in 2020 and 2021 to date, and this can only be good news for the used car market.”
Peter Waddell believes the values will go up, injecting that “it is all down to supply and demand and the demand is outstripping the supply. It did it the first time we came out of lockdown and it will do it again”.
Peter Smyth also expects values to stay buoyant, adding “30% less new cars are being sold at this moment in time, but people still don’t want to use public transport. I don’t see any issue on the horizon with used car values. Just look at all the new players coming to the market – it must be attractive!”
Mike Allen wrapped up the conversation by concluding “we have to remember that used values were very strong in 2020 in what was a supply constrained market, with Q1 2021 starting in the same vein. It would not surprise us to see a “normal correction” if the supply of new cars started to accelerate later in the year, but we do not see this on the horizon yet. On balance we see used car values remaining resilient.”
Our final thoughts
As we came to the end of the interview with our panel of experts, it was evident that one overriding theme was present throughout; their outlook for the industry is positive. Yes, 2020 was an unprecedented and difficult year and there may well be further issues to overcome as we navigate the road to recovery, but the automotive retail sector remains one of the UK’s most resilient and important economic pillars and it has an incomparable ability to overcome obstacles. From our experts’ perspective, it will continue to do so.
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 rise of digital, the future of the high street, and much more.
Interview took place in March 2021.