As we approach August, the UK auto industry is set for significant changes in 2024, driven by various economic trends. For consumers planning to buy cars, understanding these factors is crucial to making informed decisions. This article examines key economic influences on the industry, utilising insights from Nationwide, Grant Thornton, MHA, Deloitte, and EY.
Slow Economic Growth and Inflation
The UK economy is forecasted to grow by a modest 0.4% in 2024, with an anticipated inflation rate of 3.9%. This combination of slow growth and high inflation can strain household budgets, impacting the ability to purchase new cars (MHA) (Grant Thornton UK LLP). Consumers might wonder, "How will this affect my car-buying decision?" With potential interest rate cuts on the horizon, borrowing costs could decrease, making car loans more affordable and stimulating demand.
Impact on New and Used Car Markets
New Car Market
The new car market is expected to grow by 5% in 2024, reaching approximately 1.96 million units (MHA) (Grant Thornton UK LLP). However, this growth is still below pre-pandemic levels. For consumers, this means a broader selection of new vehicles and potentially better deals as manufacturers and dealers strive to attract buyers. The availability of new models, particularly in the electric vehicle (EV) segment, is likely to increase. David Borland, EY UK & Ireland Automotive Leader, notes that February 2024 saw 84,886 new car registrations, marking the 19th consecutive month of growth and the best performance for February in 20 years (MHA). This growth is significant, considering February is typically a low-volume month due to the March plate change.
Used Car Market
The used car market is predicted to remain stable, especially for vehicles aged 3-5 years (Grant Thornton UK LLP). Pandemic-induced disruptions in new car production have resulted in fewer newer used cars, driving up demand and prices for older models. This might lead consumers to ask, "Should I consider buying a used car?" The answer is yes, as stability in the used car market offers affordability and quality, despite higher prices compared to pre-pandemic levels.
Electric Vehicle (EV) Trends
Zero Emission Vehicle (ZEV) Mandate
The UK's Zero Emission Vehicle (ZEV) mandate requires manufacturers to meet specific EV quotas, accelerating EV adoption (MHA). For consumers, this regulatory push means more attractive offers such as significant discounts and favourable leasing terms. This raises the question, "Is now the right time to buy an EV?" Given the increased incentives and variety, the answer is likely yes.
Market Expansion
New brands like ORA, BYD, and Chery are expanding their presence in the UK market (MHA) (Grant Thornton UK LLP). These competitively priced EVs offer advanced features, increasing competition and choices for consumers. "What does this mean for me?" With more brands and options, consumers can expect innovation and potentially lower prices in the EV segment.
Mergers and Acquisitions
Investment Trends
The automotive retail sector saw significant investment in 2023, with continued interest expected in 2024 (MHA). This could lead to more competitive pricing and better value acquisitions. Consumers might ask, "How will this benefit me?" Increased investment could result in better deals, extended warranties, and enhanced customer service from financially robust dealerships.
Tax and Compliance Considerations
New Tax Regulations
New tax regulations and compliance requirements will impact car dealerships, affecting pricing and availability (MHA). Developments include Electric Vehicle Salary Sacrifice schemes and changes in VAT exemptions. "How can I take advantage of these changes?" Staying informed about these tax incentives can help consumers make cost-effective purchasing decisions, particularly for EVs.
Market Predictions and Consumer Insights
Despite economic challenges, the UK auto industry is set for strategic adjustments and opportunities. The anticipated growth in the new car market, stable used car market, and the push for electric vehicles present a mixed but potentially positive outlook for consumers (MHA) (Grant Thornton UK LLP).
Strategic Adjustments
Manufacturers and dealerships are likely to offer more flexible financing options, enhance online sales platforms, and focus on customer experience. "What should I look for in a dealership?" Seek out those that offer the best combination of price, service, and convenience.
Emerging Opportunities
For consumers, 2024 presents opportunities to capitalise on competitive pricing, especially in the EV market. "How can I stay ahead?" Staying informed about market trends, tax incentives, and financing options will be crucial. Additionally, the stability in the used car market offers a viable alternative for those looking to avoid higher new car costs.
Insights on Challenges and Opportunities
Challenges Ahead
The market faces persistent headwinds such as ongoing consumer confidence challenges due to cost-of-living pressures, high inflation, and interest rate rises (MHA). OEMs are adapting to changes in go-to-market strategies and regulatory challenges. "How do these challenges affect me?" These factors can influence pricing and availability, making it essential to stay informed and act quickly when good deals arise.
Growth in Electric Vehicles
BEVs and PHEVs have shown significant growth, with BEVs up 21.8% and PHEVs up 29.1% year-on-year. However, BEV market share at 15.8% is below the 22% target of the ZEV mandate (MHA). "Should I consider an EV now?" Despite growth, consumer hesitancy due to charging infrastructure concerns and other issues may persist. Evaluating your driving needs and available infrastructure is key.
Fleet Sales and Market Dynamics
Fleet sales, driven by corporate purchases, have increased significantly, impacting the used car market with premium models often entering the market unaffordable to many consumers (MHA). "What does this mean for me?" While fleet sales boost availability, they may not always offer affordable options. Consumers should explore various market segments to find suitable deals.
Conclusion
As the UK auto industry navigates these economic trends, staying informed is crucial for consumers to take advantage of emerging opportunities and favourable conditions. Whether considering a new or used car, understanding these market dynamics will aid in making informed purchasing decisions. By keeping an eye on interest rates, EV incentives, and market trends, consumers can position themselves to make the best choices in a dynamic market.
For further details, refer to the comprehensive insights provided by the sources: