What Will 2010 Bring For New Car Sales?

In October and November the new car market recorded record year on year rises in New Car sales in the UK. So, we all should be really happy, shouldn’t we?

All seems superficially rosy, yet Digital Acumen is predicting a tough year for Franchised Car Dealers in 2010. Here are some good reasons why…

The Context of 2008

Firstly, late 2008 was the weakest final quarter for sales for many years, so comparing year on year is rather like comparing the next Atlantic crossing after the Titanic.

If car sales were the same or worse than 2008, then it would have been catastrophic for all those dealers who struggled through much of 2008 and early 2009.

The Tailing Off of the Scrappage Scheme

The scrappage scheme which has, on the face of it, single-handedly resuscitated the UK car market has mostly passed. Not just because the government has merely topped it up, but also because there aren’t many people left with bangers who can afford to trade them in for new cars.

If nothing replaces Scrappage, then 2010 will go swiftly downhill.

New Car Price Rises Continuing

Running a new cars website as we do, it has been clear that even from January 2009 car prices have been going upwards. With a further suite of price increases due in 2010, the average rise has now reached four figures. This more than compensates for the scrappage scheme – it was as if manufacturers knew it was going to happen…

With most cars more than £1,000 up on last years’ prices, they are even less affordable.

The VAT Increase Returns

From January 2010 VAT goes back up to 17.5%. The addition, whilst not meaning much on smaller purchases, means a lot when it comes to a car. This pushes the cost up further for the motorist wanting to buy a new car.

The NET price of a car in 2010 will be 2.5% more expensive to the consumer even if the pre-VAT price is not increased.

Supply is Increasing, Demand Will Fall

In mid-2009 there was a strange situation. Manufacturers who had shut down, or slowed production to a crawl because of the predicted doom of 2009 were having to respond reactively to the effect of the Scrappage scheme.

They had a situation of strong demand and no products. Lead times were getting longer for delivery (up to six months on certain models like the Ford Fiesta, Fiat 500 and Hyundai i10), particularly on smaller cars.

This has now started to change, with demand tailing off, supply catching up and with a weak start to 2010 predicted – suddenly there will be oversupply again.

The Economy is Still Fragile

We are still officially in recession and, even if we are out of it early into the new year, we still face a very uncertain 2010. Even the optimists are scratching around for the green shoots of alleged recovery.

The economy is not going to drive increased car sales.

So, bearing all this in mind, we predict a tough 2010 – unless Peter Mandleson comes up with something creative and dramatic… which he probably won’t. It’s going to be a tough time for all in the trade…

Comments

Leave a Reply