Analysis: What has coronavirus done to new car sales?

Based on almost 3000 responses, 18.2% said they intended to buy immediately after lockdown restrictions ended. For many, these were ‘distress’ purchases, typically because they were at the end of a lease cycle, suggesting that manufacturers who want to capitalise need to have large supplies of vehicles in stock or be ready to turn on their dormant factories in good time to meet this initial surge. Customers will also need to have their expectations kept in check if demand truly does outstrip supply for an extended period.

The second-biggest tranche of buyers identified themselves as researching ahead of a planned purchase in six months’ time. It is unclear if the mindset of these would-be buyers was simply that they can’t foresee the end of the crisis for at least six months, or whether they are now viewing the September plate change as a realistic date by which to have a car ordered, manufactured and delivered. However, it will be a relief to the industry if there are both immediate and mid-term pipelines of customers they can work with. Potentially, they could sustain the sort of rebound that today feels like a best-case scenario.

But this raises the question of how the pipeline of would-be buyers is being handled. What Car? also studied a sample of more than 600 franchised dealers, many representing top-10 dealer groups, to ascertain how many were open and responding to enquiries.

Just 40% replied to either email messages or phone calls, suggesting that numerous potential orders are going unanswered as a result of shutdowns. That may make sound short-term financial sense during these turbulent times, but with no dealer able to give an accurate part-exchange valuation let alone complete a sale, it has raised concerns over whether they will be in a position to capitalise on the pent-up demand when the time comes. Already, reports suggest some car makers are moving to take buyer enquiries in-house for the duration of the crisis, fearing they will otherwise miss sales.

That also chimes with a Car companies are looking closely at how China is bouncing back further piece of feedback from the What Car? survey, which revealed that 36% of in-market car buyers expect contact back from a dealer within 24 hours even during the coronavirus crisis, with a further 13% expecting a reply within half a day and 6% within an hour – suggesting more than half expect a turnaround for answers of 24 hours or quicker. While these waiting times are higher than the industry standards, reflecting some degree of patience during the lockdown, few customers are having their expectations met.

An already unbelievably complex situation is set to get harder, then, as the need to cut costs and save cash – at both (often competing) car makers and retail head offices – meets the harsh reality that those who invest time and money in nurturing potential customers now will likely emerge from the crisis faster and stronger. Winners will either need deep cash reserves and forward-thinking planning or a huge slice of luck.

What will happen if demand outstrips supply?

If the What Car? data proves an accurate predictor, car companies and retailers will find themselves in a position that is highly unfamiliar to almost every brand: demand outstripping supply.

That’s because current levels of new car stock are unlikely to meet the surge in demand and because it will take time to fire mothballed factories back up to full speed. A recession may reduce that pressure, but it is unlikely to completely eradicate it.

The upshot is likely to be that the industry will focus heavily on profits, reducing unnecessary incentives to get consumers buying and building margins to replenish hard-hit coffers during the lay-off.

The outliers to that are likely to be brands with either plentiful stock or a willingness to sacrifice margin for market share. Typically, you’d look to identify them among the challenger marques, either in the mainstream or premium ends of the market, albeit with the former far more likely to have an impact.