An Outlook for the Automotive Industry in 2023 – where are we now?

In January, our Chief Sales and Marketing Officer, Mike Edwards, summarised the influences that could have the largest impact on the automotive industry this year. Now five months down the line, we look at how far we’ve come and what is still to look out for.?

Economic Update?

In the past five months, we have seen the economy follow the cautiously optimistic trajectory we anticipated. As of the latest reports, inflation has continued its downward trend, now at 8.7%. The Bank of England Monetary Committee held true to predictions with the base rate now sitting at 4.5%, a tad lower than the initial forecast.?

New Car Sales?

The Society of Motor Manufacturers and Traders’ (SMMT) prediction of a 15.4% increase in new registrations remains on track, with EVs proving to be the driving force behind this growth. The tax incentives for business users and the dominance of EVs in production have indeed fuelled this shift.?

Charger access anxiety continues to be a concern for consumers; however, the number of public chargers in the UK now totals 42,566, indicating an increase of 16% in the last five months. This upward trend in infrastructure development will likely continue to alleviate consumer concerns.??

The Used Car Market?

The used car market has been fluctuating in 2023. Interestingly, there is an observable growth in the demand for older, cheaper cars, especially those qualifying for Euro 6, which can be partly attributed to the introduction of more clean air zones. Contrarily, higher-value cars, particularly EVs, have witnessed higher levels of depreciation.?

The shortage of new to 3-year-old cars, largely due to the decline in new registrations and strong consumer demand, has continued to push buyers towards older used cars. This trend is expected to persist for the remainder of the year.?

Significant Market Changes?

Emerging Agency Models?

Mercedes Benz's move to the agency model started a ripple effect in the industry with other manufacturers indicating similar intentions. The changes are expected to lead to a reduction in aftersales activity and new car profits, pushing retailers to find balance through their agency role commissions and savings in new car stock funding.??

The agency model has further emphasized the importance of the used car market and other profit centres, notably finance and value-added products. As predicted, the FLA reports that used car finance penetration has now grown to 47%.?

Consumer Duty??

With its introduction on 31st July 2023, the FCA's Consumer Duty is already influencing change amongst the insurance and FS sectors. Firms have had to invest substantial resources to understand the implications of the changes and build their capabilities accordingly. However, the four outcomes required by the FCA are proving challenging to translate into operating standards.?

Finally…?

We're almost halfway through 2023, and the year is proving to be as dynamic as anticipated. We are navigating an evolving landscape, with the rise of EVs and the emergence of new sales models. As always, we at AutoProtect Group, continue to offer our support and assistance through these transitions. Thanks to all our customers for your continued support, and to everyone across our industry, our best wishes for the months ahead.?