An update from our CEO
Watch or read the latest update from our CEO Nathan Coe below.
I hope you’ve enjoyed some time off with your family, friends and loved ones over the festive period and that 2024 has started well. I’m sure this year will have plenty of opportunities and challenges to throw at us, but I’m confident that by working together, we’ll get the best results. I’m always impressed by the positive stories I hear from customers who have worked closely with our account teams – they offer great insights and can help you to drive and meet your goals. So, if you haven’t spoken to us recently, please reach out so we can support you in hitting your targets this year.
Encouraging consumer demand to start the year
We have entered 2024 with the used car market in good shape. Since Boxing Day consumer demand has been positive, with the number of visits up nearly 7% as of mid-January, and market health up by 6%. This has been supported by our biggest-ever investment in marketing, which kicked off on Boxing Day to stimulate the market and drive buyers to your stock. We have seen a slower start than expected for this demand converting to enquiries, however this is improving daily with the weather. More encouragingly, early transaction data to mid-January suggests that sales performance is already slightly up on last year, so we remain confident on the outlook for 2024 overall. Robust demand combined with the slow return in supply for some segments, means retail prices continue to show more resilience than trade. However, despite these signs of a strong market, average retail prices in mid-January are down -6.2% on last January, suggesting that recent trends in trade prices are flowing through into the retail market. Current indications show January retail prices could finish the month over 7% down.
We’re seeing highly desirable vehicles priced well below the retail market as some pricing strategies are being driven by trade movements, placing pressure on retail values. In mid-January, the missed profit opportunity through under-pricing now stands at £31 million, risking £4,000 in potential profit per retailer. The opportunity is there for us to hold our position and follow the retail market to spot margin opportunities on trade buys where the retail market is strong.
What we expect from 2024
There is no doubt 2024 is going to be another year of change for our industry. Here at Auto Trader, we expect these four key themes to shape this year.
1. New car market set to return to push model. The new car market looks set to return to a “push” model as manufacturers face a combination of slowing retail sales, new regulatory targets, and increasing competition from new entrants. This is all likely to lead to discounting and finance offers to stimulate consumer demand – particularly from electric models. The ZEV mandate will have a particularly big impact, as 22% of all brand sales are required to be emission-free, with manufacturers facing a £15,000 fine for every non-compliant vehicle sold. This will create challenges with electric models making up just 16% of sales across brands last year, with some as low as 3%. This highlights the need for offers to stimulate demand which we’re already starting to see. These vehicles will make their way through to the used market in the coming years, so if you haven’t begun to plan your electric vehicle retailing strategy, 2024 is the time.
2. Used car market to grow as demand remains robust. Secondly, we expect used car market transactions to increase this year, supported by robust consumer demand as we continue to see consumers prioritise spend on their next vehicles. Market supply will be hampered by the 3 million ‘lost’ cars that weren’t sold between 2020 and 2022, creating new supply pressure in 2-5 year old vehicles. In spite of that, we expect to see c.7.24 million used car transactions this year, c.70,000 more than last year, which should mean more opportunities for Retailers.
3. The retail market is not a driver for price reductions. Although supply is returning slowly and inconsistently, creating some price pressure in younger vehicles, it is still being outpaced by consumer demand. This creates a positive overall market health. Speed of sale has been in line with prior years in the last few months, used car transactions were up around 4% in 2023. We expect and hope to see a continued stabilisation in retail prices through 2024. More than ever, it’s crucial to follow vehicle-level Retail market data and our future Trended Valuations data to source, price and drive performance from every unit of stock.
4. Data will be the currency. The increasingly complex market means that 2024 will be the year when data becomes essential in decision-making. We increasingly see variability in supply, demand and pricing dynamics across the market. So accurate and real-time data on a vehicle-by-vehicle level is essential to identifying profit opportunities and managing risk. We aim to provide you with simple yet powerful data solutions, which combine both the scale and granularity of our retail market data to help you to act with confidence to take a vehicle-level strategy to maximise margin per vehicle. Through our enhanced Retail Check product all retailers have access to the data and tools they need to make this a reality.
Supporting you through the year ahead
It is this market context and the key themes we will be navigating in 2024 that have driven our investment in marketing, data and insight solutions for you. As always, our goal is to give you the confidence to act in these changing times. We’ve just announced our package review for 2024 as we look to make sure Auto Trader provides the best sales platform, data solutions and performance insights to our customers.
We are launching two new data solutions, available to retailers on all advertising packages in 2024. Trended Valuations will give you a vehicle-level view on both historic valuations over time, as well as future forecasts to help you spot profit opportunities and better manage risk. Retail Check is also now available as of last week to all retailers, with powerful new metrics to help you take that all-important vehicle-by-vehicle approach to sourcing and pricing. Both features are available in either Portal or integrated into your system through Auto Trader Connect. If you need any support using these new features, we’ll be launching new online masterclass modules, and you have our account teams on hand to walk you through them.
Ensuring that no retailer is left behind on the journey to omnichannel retailing is also a key commitment for us this year. We’ve seen different fortunes play out for online retailers and many have evolved to an omnichannel model, enabling people to conveniently complete more jobs online complemented by the in-person service and support that only a retailer can offer. This is the solution we think will work for most retailers but is difficult to do and requires a lot of technology work. The good news is that we’ve done that for you, and you’ll hear more about our Deal Builder solution soon which allows a consumer to get a part-exchange valuation, apply for finance and reserve a vehicle.
Finally, and very important to me, we are committed to investing in our partnership. We’re investing more in marketing than ever before, we continue to support you with improved data and insight, and we’re continuing to grow our product and tech teams to deliver even more powerful retailer and consumer solutions to improve the car buying process for everyone.
All of us here at Auto Trader are invested in your success, so if you need any support in navigating the year ahead, please do reach out to request a forecourt review. If you have any feedback at any time, you can always contact me directly at nathan.coe@autotrader.co.uk.