Automotive industry hopeful for normality
in 2022

As I pen what will be my final AutoFocus introduction of 2021, I reflect on what has been one of the most unusual years we've ever seen in the automotive industry.

While dealers have had less physical disruption to contend with this year in comparison to 2020 (thanks to efforts of healthcare workers around the world and the incredible rollout of COVID-19 vaccines), the market that’s emerged has been one of extremes; a market where stock is in such short supply that cases of good-quality, nearly new vehicles exceeding the price of their brand-new counterparts are commonplace.

We expected price rises in 2021; it was an inevitability as global supply chains restarted. But the extent to which we've seen used car prices rise and the length of time these prices levels have sustained (with no end in clear sight) has surprised everyone.

The good news is that we know the reasons why the market is like this. It all starts with new car supply, which continues to be hampered by the much-publicised scarcity of semiconductors and shortages of other vital raw materials upon which the automotive industry is reliant, such as aluminium and magnesium. This inevitably created more demand in the used vehicle sector, which was already under stress due to increased demand and changing transport habits. The phrase 'a perfect storm' is seldom justified, but in this case, it unequivocally describes the situation we're in.

While an understanding of the forces influencing the sector is valuable, it doesn't help businesses turn a profit. It's a tough market to operate in. Still, once again, retailers, fleets, manufacturers and the supply chain have been forced to adapt to a market where high unit profits can be achieved but vehicles are in short supply and in the case of fleets, they can’t source replacement vehicles to optimise profitability on existing vehicles.

So, when will some normality return? We anticipate - and hope - that material shortages, and therefore new car production, will start a meaningful recovery in the early parts of 2022 and continue to improve as the year progresses.
We cover more on this in our 'New car market' section.

And that leads on to another question: what even is normal nowadays? The pandemic has accelerated so many trends and created an entirely new marketplace to what we had two years ago. It's also entirely possible that we've reached a new benchmark for used vehicle values that will never dip to pre-pandemic levels. There are many questions about the future, but for now, we try to explain how this affects the used car market today in our 'Used car market' section.

As ever, this issue of AutoFocus is packed with the very latest commentary, insight and data related to the most important automotive topics today, and I thank NFDA,
Grant Thornton, and eBay Motors Group for their contributions also.

I hope you find it insightful and that it provides context to the challenges you are facing right now. Enjoy the issue.