Posts by George Augustaitis
As the UK reopens and pent-up demand floods the market, June car sales are likely seeing a lift. This type of spike tends to be short term, but rumors of an economic stimulus programme or vehicle scrappage scheme could result in a lift that carries into July or August. It’s the possible lack of supply that could temper car sales in the near future.
It’s no secret that the COVID-19 lockdown has hit the automotive industry hard. UK dealerships were closed for just over two months in an attempt to curb the spread of COVID-19. Typically, hundreds of thousands of used and new vehicles would have been sold during this time period.
Instead, what we’ve seen is the creation of pent-up demand from consumers who wanted to purchase a vehicle but could not do so in March and April. However, although UK leads submitted to dealers hit a low in March and fluctuate day to day, they’ve been on the rise overall ever since. This lift in leads tallies with the results of our COVID-19 Sentiment Study, which found that 87% of respondents expect to purchase a car later than they initially planned. Even more significant, only 4% of those planning to buy this year have delayed their plans indefinitely. In other words, sales will still happen this year—just a bit later than expected.
The spread of COVID-19 has wreaked havoc on the UK economy. It’s driven people indoors and pushed businesses to furlough large amounts of their workforce, resulting in a recession. Additionally, the pandemic forced the closure of car dealerships for much of March and all of April, which brought the automotive sector to a near halt.
New vehicle registrations in April alone fell 97%. According to the Society of Motor Manufacturers and Traders (SMMT), only 4,321 new cars were registered in April 2020. That’s the lowest monthly registration number since February 1946 when the UK was undergoing rationing and trying to rebuild after wartime destruction. But despite the steep decline in sales in recent months, it’s not all doom and gloom for dealers.
Today, our Director of Automotive Industry and Economic Analysis, George Augustaitis, takes a look at how consumer sentiment is trending among CarGurus shoppers.
Before the onset of the COVID-19 pandemic, UK consumer confidence (as measured by the GfK UK Consumer Confidence Index) was trending upward. As of last week, it had dropped to -34, signaling that consumers are feeling significantly less optimistic about their financial security, their job security, their ability to find new employment if made redundant, and the economy overall.
The decline in consumer confidence is troubling but not surprising, as it is typical in a recession. However, the rapid decline in vacancies in the job market that we’ve seen due to COVID-19 has likely contributed further. According to the Recruitment and Employment Confederation (REC) and KPMG, the vacancies index fell to 47.8 in March, the first fall below the no-change 50 level since September 2009.
All of this means that consumers right now are less likely to make a large ticket purchase, as evidenced by the 52 pt. decline in the Major Purchase Index. When a consumer does not feel confident, they are less likely to make a large purchase like a vehicle, unless they need to. We see this in the decline in UK vehicle registrations, which fell 44% in March 2020 and 97.3% in April 2020, according to the Society of Motor Manufacturers (SMMT).