Pent-up demand from April fuels May lead growth

Posted by George Augustaitis on May 21, 2020

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.

Signs of a turnaround beginning to mount

As dealerships have remained closed since mid-March—typically one of the strongest months for new car sales in the UK—demand has been building. According to the CarGurus COVID-19 UK Sentiment Study, 87% of respondents expect to purchase a car later than they initially planned. Even more significant, only 4% who were planning to buy this year have delayed their plans indefinitely. In other words, sales are lagging but not lost. Consumers who weren’t able to buy a car in March or April because of the lockdown are due to return to the market now that Boris Johnson has announced the gradual easing of lockdown measures.

In fact, that pent-up demand is already starting to hit the market. Leads hit a low in March, shortly after many dealerships started to close, but they have been rising ever since. The volume of indexed UK used vehicle leads* on CarGurus is now higher than it was at the start of February.

UK-CarGurus-indexed-leads-graph

Dealers must prepare for a new normal

For many consumers, a vehicle purchase is essential. According to the CarGurus COVID-19 UK Sentiment Study, 64% of those planning to buy this year said their vehicle purchase was a necessity. It thus follows that buyers will come back to the forecourt post-COVID-19 and sales will return. In the meantime, there are three ways dealers can prepare:

  1. Increase sanitisation precautions. Focus your car preparation efforts on those areas that the driver and any passengers are likely to touch.
  2. Price vehicles competitively. Though it might seem obvious, now more than ever, consumers will be shopping for the best deal.
  3. Make sure you have the right stock mix. As buyers adjust their budgets, the vehicles you stock should reflect what buyers are searching for.

As UK leads climb back to February levels, it’s important to remember that the longer customers have to wait, the more demand will continue to build. All the signs point to there being an eventual growth in vehicle sales that will outpace seasonal norms.

*CarGurus defines leads as user enquiries via its marketplace to dealers by phone, email, or managed text and chat
Topics: CarGurus data, covid-19, industry insights