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Auto Finance Sponsored by Auto Finance News Positivity in new car market, but volatility remains Published: 8th February 2023 Share Cox Automotive has released its new car forecasts for the year, presenting an upside, baseline, and downside scenario. The company highlights the positive position of the UK market, but still states that volatility remains, which could change the shape of the sector for years to come. The company’s most likely scenario for new car registrations throughout 2023 stands at 1,711,447, which would be a 6% increase on actual 2022 levels, but still -26% down on pre-pandemic levels. In this instance, the year gets off to a great start with 448,937 new registrations in Q1, a 7.5% increase on last year’s quarterly performance but still 32.4% down on pre-pandemic levels, the likes of which may never be seen in the market again. Cox Automotive believes that a lack of infrastructure to support more EV purchases, discussions surrounding the agency model and the rise of Chinese brands in the UK and Europe could all change the shape of the sector for years to come. However, when making its forecasts for the year ahead, the company has considered the positive position the new car sector currently finds itself in, having already navigated several significant headwinds. Philip Nothard, Insight and Strategy Director at Cox Automotive, explains: “Last year was challenging for the new car sector, yet we began 2023 with a welcome, albeit small, feeling of positivity. There were signs in the closing months of last year that manufacturers were increasing supply levels, reducing market volatility, with added reports of tactical registration activity and increased activity in the leasing sector; we have signs of a ‘normal’ car market.” A market that could go either way These potential stability indicators could manifest to realise Cox Automotive’s upside scenario for the year. Such an outcome would see new vehicle production recover quicker than anticipated, consumer and business confidence improve and a resolution in Ukraine that returns the sector to its halcyon days. This would equate to 1,904,024 new car registrations, 18% higher than the actual figure in 2022 but still down -17.6% on pre-pandemic levels. Q1 gets off to a very strong start with 507,166 registrations, 21.5% more than the same period for 2022. The most likely scenario is the company’s baseline prediction that steady stabilisation continues, interest base rates continue to meet forecasted levels, and appetite within fleet and leasing companies returns following market incentives to aid new vehicle purchases. This leads to 1,711,447 new car registrations, 6% up compared to 2022, with 448,937 registrations in Q1 alone. Cox Automotive’s downside scenario predicts a reduction in fortunes with worsening complications caused by the ongoing conflict in Ukraine, failed government incentives to slow inflation, and further interest rate rises to put additional pressure on consumer spending. As a result, the company’s downside figure for the full year is 1,614,352 new car registrations, the same number recorded in 2022 but still -30.2% down compared to the nine years prior to 2020. Defining factors for new car market success Cox Automotive outlines some of the broader sector trends likely to affect the new car market, not just in 2023 but for the years to come. A particular segment requiring attention this year is EV. While one-fifth of all UK registrations were plug-in vehicles during 2022, concerns surrounding EV prices and infrastructure remain. Nothard explains: “As we edge closer to the Zero Emission Vehicle Mandate regulation, more needs to be done for EVs to truly become the dominant mode of transport. Significant investment is still needed in the charging infrastructure to support a growing EV parc. In addition, there are still barriers to entry for many people, with the cost of EVs being higher than their petrol/diesel counterparts.” Reflecting on Volvo’s recent postponement of its agency model launch for three months, Cox Automotive expects several other OEMs to hold back and observe competitors before choosing a similar route. Nothard believes there are both pros and cons to such a model. “An area of caution around the agency model is its pressure on cash generation, working capital and market volatility, all exposures currently managed by retailers. It could prove advantageous for those OEMs not entering immediately. However, even in countries such as Australia, where many manufacturers felt compelled to transition their dealer network to the agency model due to the supply disruptions resulting from the pandemic, it remains unclear what the impact is on both volume and profitability.” Finally, Cox Automotive expects the long-term face of the UK’s new vehicle market to be transformed by an influx of Chinese OEMs entering the market. Nothard adds: “The timing couldn’t be better for Chinese manufacturers as established OEMs step away from affordable but ultimately unprofitable legacy models. This has left a void to fill as people still need small, cheaper cars.” Lisa Laverick Editor - Asset Finance Connect Sign up to our newsletter Featured Stories NewsToyota cuts 2026 global EV output plans by a third NewsVan market ends summer with a return to growth NewsAugust new car market holds steady Auto Finance