Amidst rapid change in the automotive sector, Rupert Pontin, Commercial Director at One Auto API, takes a closer look at what you can do to protect and maximise profits…

A lot can happen in a month in automotive retail.

Without doubt, the story dominating headlines in recent weeks has been the ICE ban delay – the announcement that the ban on new petrol and diesel car sales is being pushed back from 2030 to 2035.

But, what does this really mean for the sector?

In reality, OEMs have already spent a lot of time and money bringing EV production in line with the original 2030 deadline and many are committed to delivering on that – Nissan being one of the latest to state their commitment to stop sales of combustion-engined cars by the end of the decade.

So, the EVs will be coming whether we are ready or not.

However, without decisive actions and incentives to drive more demand in the used car market there is a danger of supply exceeding demand. Therefore, pricing may see a further decline and confidence in future residual values could also drop resulting in increased PCP and HP costs.

In addition, delaying the ICE ban could mean a reduction in the pace of infrastructure development which could, in turn, aggravate EV take up by consumers feeling range anxiety.

We are already seeing news of class action lawsuits in the US from EV owners alleging false advertising of the range of electric vehicles.

And, while achieving 100% of WLTP figures isn’t always guaranteed for ICE vehicle equivalents, legal action and negative publicity like this once again shows how important range is in encouraging consumers to switch to an EV – and in vehicle valuation.

So it’s increasingly important that used car operations with an interest in EV retailing are using the very latest EV range data to ensure they make informed EV buying decisions that convert quickly into profitable EV sales.

And, speaking of profits, it’s worth keeping an eye on used diesel vehicle values in the coming months too.

If uncertainty around switching to EVs results in consumers keeping faith with traditional vehicle choices, we may see increasing demand for fuel efficient Euro 6 compliant diesel vehicles right at the point that there are fewer coming to market thanks to reduced new diesel sales in recent years.

It’s certainly one to watch closely as things unfold in the weeks ahead and by interrogating retail pricing data you can be sure to pounce when the time is right.

Conflicting Messages On Used Car Values

Depending on where you look at the moment, you may be seeing what appear to be polar opposite messages and conflicting opinions about used car values.

Within the last week we have seen headlines focusing on the steepest drop in used car values in 15 years and there are whisperings that auction conversion rates are lower than they have been all year – with more cars going to provisional bidders and selling after auction through the negotiation process.

At the same time, others are confidently reporting that used car values are still going up.

So, what’s going on?

The reality is that the market is in a state of flux and likely to be displaying a combination of all of those factors depending on where you are looking – especially if you take into account a typical four-to-six-week time lag between impacts on wholesale and retail values.

Context is really important too. While the drops may have been steep, the values themselves are still considerably higher than they were pre-2021 so what we are seeing is closer to a steady readjustment towards those historical levels.

As always, to avoid being caught out, a full appreciation of the market using all available data sources is critical – applying your own sector experience and insights to piece together the reality you face and navigate a way to success.

Regional Pricing Reaping Rewards

Alongside other household bill increases, 2023 has also seen car insurance costs rocket, with recent reports stating that premiums have increased, on average, 50% in a year.

Reasons for the increase are many and include economic inflation, rising energy bills, increases in claims following the pandemic and the growing cost of repairs – including costs of supplying replacement vehicles when repairs take longer than expected.

While there may be limited scope for our industry to bring these premiums down in the short term, insurance costs can influence and inform decisions around used stock portfolio – especially when there are regional differences in best-selling vehicles.

Data from Consumer Intelligence shows that 2023 insurance premiums have risen the most in London, with a 53.5% increase while those in Newcastle Upon Tyne ‘only’ saw increases of 42.8%.

When you factor in the Ultra Low Emission Zone (Ulez) expansion in the capital too, it’s easy to see why many used car operations are thinking very carefully about how their location/s can influence the buying and selling of different vehicle types.

By using data and insight on local retail pricing and reviewing local competition, you can be sure you are targeting in-demand stock for your region, moving vehicles to the correct sites, optimising pricing decisions and identifying new profit opportunities.

Here to help

If you have any questions about how you can put yourself in the best position for used car success, take a look through our latest guide on this topic: “Maximum Profit: 13 Data Driven Strategies for Minimising Your Used Car Risk” – click here to download your copy