No end in sight for new car supply issues

The start of a new year is often seen as an opportunity to start anew, to move on from the trials and tribulations of the previous year and set our sights on a better future. This is undoubtedly the case in the automotive industry after more than a year dogged by new car production issues, increased lead times and skyrocketing used car values.

But as we approach the end of the first full month of trading, a sense of déjà vu is setting in.

New vehicle supply constraints remain nearly as prevalent as they were a year ago, with the hopes of semiconductor and material shortages improving in the early parts of 2022 rapidly falling away. While some green shoots within the supply chain are starting to appear, we are unlikely to see much improvement until at least early 2023.

Normal seasonality has become a thing of the past, at least for the time being. However, the industry has proven to be remarkably adaptable throughout the pandemic, and it must continue to do so while this volatile and uncertain trading climate continues.

Microchip and material shortages continue to hinder new car production across the global auto industry.

As a result, several OEMs have indicated that they no longer expect to reach original volume targets in 2022. The impact isn’t uniform; some manufacturers, such as Citroën and Polestar have fared better than others and have managed to increase production and hit sales targets. However, this is very much model specific, and we cannot expect normal volumes to return this year.

The industry has often focused purely on semiconductors as the reason for supply shortages, but the actual causes are more complex. Yes, microchip shortages are causing a major headache, but transitioning to EVs is also impacting supply chains. Factories need to be reconfigured to accommodate EV production and other alternatively fuelled vehicles. These changes don’t happen overnight, but they are necessary to move towards cleaner and greener personal transportation.

A section of the market believes that when the pandemic is over, and manufacturers have semiconductors and materials in abundance, the market will return to how things were before. But our view is that this cannot be the case. Over the last two years, governments across the globe have made it clear that clean power is the future, most notably at the COP26 climate conference in November; therefore, it would be impossible for the automotive industry to return to its old ways. Alternatively fuelled vehicles will only become more common from now, and consumers are becoming increasingly open to adopting them.

As OEMs continue to invest in new technologies, COVID-19 continues to affect the global workforce. Labour shortages are still prevalent, and every country has their own set of restrictions and regulations that need to be navigated.

Then there’s Brexit, a word that some would prefer to forget about due to its added complexities to the UK logistics industry. Delays remain when trying to access the UK, and many European OEMs have decided to focus their strategies on local markets, which could cause further supply issues in the UK down the line.

While all these compounding issues are creating uncertainty for automotive manufacturers, retailers, and suppliers alike, we must remember that a consumer is waiting for their new vehicle at the end of the supply chain. Unfortunately, lead times continue to stretch into the months, not weeks, and the longer this continues, the more pressure this will put on the used car market as some consumers look for alternative options.

However, in most cases, consumers have proven to be prepared to wait for the vehicle of their choice. Therefore, profitability and margin retention play a significant part in retailers’ strategies. Learnings from the supply shortages have clearly proven that when targets and volumes are not being chased, there are still ways to make a profit from new vehicle registrations.

Building on recent new car figures, the market factors mentioned above, and in line with previous Cox Automotive forecasts, we have adjusted our new car registration forecast for 2022.

Best-case scenario 

In our best-case scenario, we predict Q1 2022 will end on 564,645 registrations, a +32.7% increase year-on-year, but -15% down compared to the 2000-2019 average and -19.5% when compared with the most recent pre-pandemic 2019 performance.

Q2 2022 is forecast to end on 486,828 registrations, a +0.5% increase year-on-year, but -12% down compared to the 2000-2019 average, and -14.3% compared to the most recent pre-pandemic 2019 performance.

Mid-case scenario

In our mid-case scenario, we predict Q1 2022 will end on 506,804 registrations, a +19.1% increase year-on-year, but -23.7% down compared to the 2000-2019 average and -27.7% when compared with the most recent pre-pandemic 2019 performance.

Q2 2022 is forecast to end on 435,813 registrations, -10% down year-on-year, -21.2% compared to the 2000-2019 average, and -23.3% compared to 2019 registrations.

Worst-case scenario

In our worst-case scenario, Q1 2022 we predict the quarter will end on 431,787 registrations, a +1.5% increase year-on-year, but -35% down compared to the 2000-2019 average and -38.4% when compared with the most recent pre-pandemic 2019 performance of 701,036 registrations.

Q2 2022 is forecast to end on 387,249 registrations, -20.1% down year-on-year, -21.2% compared to the 2000-2019 average, and -23.3% compared to 2019 registrations.

Best-case scenario

Our best-case scenario for 2022 sees the year end on 2.091 million registrations, a +26.9% increase year-on-year, but -9.5% down compared to the both the 2000–2019 average and the most recent pre-pandemic 2019 performance.

Mid-case scenario

In our mid-case scenario, we predict the year will end on 1.879 million registrations, +14.1% increase year-on-year, but -18.7% down compared to the both the 2000-2019 average and the most recent 2019 pre-pandemic performance.

Worst-case scenario

In our mid-case scenario, we predict the year will end on 1.681 million registrations, a +2.1% increase year-on-year, but -27.3% down compared to the both the 2000-2019 average and the 2019 pre-pandemic performance.