The road ahead: Our forecasts for 2024
As 2023 comes to a close, we’re taking a look at what our data is telling us is in-store for 2024 and sharing our forecasts for the year ahead.
Overall, this last year has been a positive one for the industry, with sales of both new and used cars rising and prices holding strong. But the overall figures mask what is a very nuanced market and it’s these nuances that show what’s going on in the market and what we can expect over the coming year.
New car to return to ‘push’ in 2024
This year has seen new car transactions surge by a staggering 18.6% year-on-year (as of December). This growth is certainly welcome given the well-documented struggles the new car sector has experienced over the last three years.
However, demonstrating the nuance in the market, almost all this growth is thanks to rapidly rising fleet demand, with retail sales remaining almost flat, having grown by just 1% last year. Retail sales have slumped since the pandemic and have struggled to recover with retail sales down 29% vs November 2019 highlighting the struggle.
Looking to next year, the new car market is set to return to a ‘push’ model, as manufacturers face a challenging combination of slowing retail sales, new ZEV Mandate targets, and increased competition from a host of new entrants vying for UK market share. As a result, the significant discounting and enticing finance offers we’ve seen over recent months to stimulate consumer demand will continue, which we predict will fuel a 4.2% growth in new car sales: from an estimated 1.89 million in 2023, to circa 1.97 million in 2024.
There are plenty of factors that could impact this sales growth, however. The current economic climate could well hamper both fleet and retail sales. We have seen in the past that slowing house transactions and rising interest rates correlate with new car sales and with both these factors in play and showing no signs of major reversal in the near term, we could see sales begin to falter.
Consumer demand for new electric vehicles faltering as used soars
New electric vehicle (EV) sales have mirrored the overall new car market with transactions rising whilst consumer demand has fallen. We’ve also seen demand for new EVs soften on our platform, with the EV share of new car adverts on our platform declining from a high of 26.5% in September 2021 to 17% in December 2023.
New electric vehicle sales have had little support from recent government announcements with the delay to the 2030 ban on the sale of new petrol and diesel cars only serving to confuse consumers with only 39% of buyers saying they will buy an EV by 2035.
However, whilst the delay to the ban has undoubtedly impacted consumer confidence, the continuation of the Zero Emission Vehicle (ZEV) mandate, which comes into effect next year and dictates that a certain percentage of a manufacturer's new car sales must be zero emission otherwise face a fine of £15,000 per non-compliant vehicle, will see manufacturers push new electric vehicle sales aggressively with huge discounts and finance offers to stimulate demand.
Whilst it is encouraging to see that newer EVs will hit UK roads, we as an industry need to do more to stimulate interest from consumers by helping the car-buying population to understand the benefits and suitability of EVs but also to improve affordability.
Whilst affordability remains an issue for new electric cars, the drastic improvements in the affordability of used EVs have helped to stimulate demand on our marketplace with second-hand electrics now enjoying record levels of interest.
Average used EV prices fell circa 20% through 2023, owing to an influx of supply due to the ongoing de-fleeting of the circa 750,000 electric vehicles sold over the last three years. Many used EVs have now reached price parity with their Internal Combustion Engine (ICE) equivalents. Improved affordability and choice means the used EV market is only set to accelerate in 2024.
Robust used car demand in 2024 despite challenging economic backdrop
As with used EVs, the broader used market has once again demonstrated its strength and resilience this year. Supply has begun to slowly return, up 2.9% YoY, whilst consumer demand has risen even further, up 8.6%. As a result of demand continuing to outpace supply, the overall used car Market Health for 2023 stands at a very healthy 5.57%.
Despite the pressures on UK consumers (inflation, interest rates, and potentially, a general election thrown into the mix), the used market is traditionally insulated from macroeconomic challenges and so we expect to see consumer demand to remain robust through 2024. Indeed, eight in ten[1] in market car buyers visiting Auto Trader claim to be feeling at least as confident as last year in their ability to afford their next car.
Although this dearth of sub-5-year-old cars will continue to impede transactions, due to robust demand and the underlying health of the market, Auto Trader predicts the market will increase on 2022, albeit marginally, to 7.24 million sales, from the 7.17 estimated for this year.
With demand set to remain strong, supply lowly returning and sales set to increase next year, we should expect that used car prices should remain stable through next year. However, recent trade price drops have impacted the market and seen prices fall despite the positive market dynamics. We would encourage retailers to follow a retail back pricing strategy, focussing on what consumers will pay rather than basing decisions on trade prices.
For more information on what we could see with used car prices in 2024, check out this short clip with our Data & Insight Director Richard Walker.
Car Parc set to grow lower new car sales will impact the makeup.
Rising new and used car sales mean that the UK car parc will grow in 2024, with 32.4 million cars expected to be in the parc in 2024, up from 32.3 million in 2023.
We will continue to see the impact of the drop in new car sales since 2020 on the parc with 31% fewer under 5-year-old cars in the parc in 2024 vs. 2019.
Overall, we’ve seen record-breaking levels of engagement on our marketplace in 2023, both new and used sales have increased, and with consumer sentiment remaining positive, we’re hopeful for another robust year for demand and overall transactions.
To further help you understand what’s in store for the year ahead, we’ll be releasing a blog in early January detailing our key trends to watch out for in 2024.
You can also register for our first webinar of the year where we’ll be taking you through our latest market insights including what we’re seeing with pricing to help guide you through the start of the year. Register now and join us live on the 5th of January by clicking here.
Sources
[1] November 2022 n. 450 people