How has Coronavirus impacted the UK’s automotive sector over the past year?
This is the latest report in a series of weekly updates for industry colleagues from Rachael Prasher, managing director of What Car? and Haymarket Automotive.
This week marks 12 months since the UK first went into lockdown, with the Government ordering businesses, restaurants and other non-essential retail outlets to close in order to help prevent the spread of the Covid-19 virus. It was also this time last year that What Car? began its weekly industry study to track consumer attitudes and intentions.
To mark the anniversary, we have looked back at how some of the key measures have fluctuated over the past 12 months. The results contain responses from 206,717 in-market car buyers, with an average weekly response rate of more than 4300 respondents.
One measure of demand is how soon in-market buyers are looking to purchase their next car. Our research highlighted the clear effect that each lockdown had on buyer confidence. At the beginning of April last year, on average just 5% of in-market buyers were looking to purchase in the next four weeks, while 47% said they were looking to buy in more than six- months’ time. Buyer intention was very low.
As we moved closer to June, consumer confidence grew. From 1 st June, when showrooms could reopen, a growing number of buyers were considering a new car purchase within four weeks, while the share of buyers looking to buy in more than six months declined. We recognised that this translated into pent-up demand, with new car sales up 11% in July.
From October, localised lockdowns became more prevalent and we began to see a dip in the short-term buyer timeframes. However, by this time online platforms had become more prevalent, and confidence in digital buying was high. Our survey in October found that 35.15% would be comfortable buying their next car entirely online; this may explain why subsequent lockdowns didn’t see an equivalent decline in buyer timeframes, with buyers now able to go online to complete the purchase of their next vehicle.
What is evident from our research is that each of the lockdowns has influenced buyer timeframes, which in turn impacted car sales.
The graph above plots the year-on-year monthly percentage change in private new car sales, using figures from the Society of Motor Manufacturers and Traders (SMMT), against the share of buyers looking to purchase a car in the next four weeks. We found a correlation coefficient of 0.75 between the two data sets.
While buyer timeframes were clearly influenced by lockdowns, societal restrictions had less of an effect on budgets. In a recent, March 2021 survey, 79% of 1028 in-market buyers said that Covid-19 has not changed how much they are looking to spend on their next car. While 15% said they will now spend less on their next vehicle, 6% told us they will actually spend more.
In September last year, we began tracking how much buyers are expecting to spend on their next car * . As the graph below shows, budgets have remained consistent throughout the pandemic with the majority of buyers looking to spend £20,000 – £30,000 on their next vehicle.
Through October to December last year, we also tracked the types of cars that buyers are most interested in. A similar consistency was revealed, with family SUVs, family cars and small SUVs among the most popular vehicles – tallying with the list of best-selling models according to the Society of Motor Manufacturers and Traders.
Vehicle delivery expectations
Another key metric we looked at was delivery times – how soon buyers wanted their vehicle delivered. From September to March, we saw predominantly steady delivery expectations, with the majority of buyers aiming to have their car within two months of placing an order.
The nationwide lockdown imposed in November saw a small spike in the number of buyers wanting their next car delivered within a week, presumably in anticipation of showrooms closing once more.
One of the key lessons from the past 12 months is the severe impact that lockdowns have had on both buyer confidence and activity. Though online channels have helped meet the most urgent consumer demand in recent months, lockdowns have resulted in a fall in the share of buyers looking to purchase in the short run, pushing back sales to a point when showrooms can reopen.
Our research in February this year found that 95% of buyers believe showrooms can be operated in a Covid-safe manner, with the same percentage happy to visit when restrictions allow them to do so. Showrooms reopening in April will likely be met with pent-up demand once more affecting the market.
The good news is that Covid-19 has had less of an impact on buyers’ budgets and vehicle choice than some have feared, suggesting that, once showrooms can reopen, dealers can look forward to a period of relative normality. Maintaining healthy stock will be important because the majority of buyers will want to have their next vehicle within two months of placing an order. So, any adverse effects on production caused by the pandemic could still have an impact on buying decisions as we progress.
*The budget brackets were different in December and January, and thus could not be accommodated in the graph.
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