The road ahead for Motor Traders

Authored by Q Underwriting’s Adam Edwards

The last couple of years has already had a profound effect on the motor trade industry. Manufacturers and car sellers are still feeling the pinch of COVID-19 and Brexit, with the supply chain hit in multiple places, but good news is on the horizon for electric car sales and services. Read on as Adam Edwards, part of our Motor division, gives his take on the issues affecting motor traders right now.

COVID-19

Whilst the world slowly recovers from COVID-19, we are still seeing residual effects on the supply chain, which has already been under significant pressure due to the stop/start nature of economies across the globe over the last two years.

This pressure on the supply chain has benefitted used car dealers due to an increase in both prices and demand for second-hand vehicles, with reports showing the average used car price to have risen by £4,500 compared with 2019. COVID-19 has had a profound impact on the increase in demand, due to the closure of many forecourts across the UK. Estimates suggest a shortage of around half a million new vehicles in 2022 alone, due to a 9% fall in UK new car registrations compared with 2021 as supply chain shortages continue to disrupt order fulfilment.

Brexit

The impact of Brexit is still causing supply chain issues. With more intensive border checks and paperwork, car imports and the delivery of car parts is slower and more difficult, causing multiple bumps in the road.

The impact of the war in Ukraine on semiconductor shortages

The supply chain has also been affected by the war in Ukraine. Critical raw materials used in the manufacturing process of many car parts are currently produced in Ukraine and Russia, with Ukraine making 70% of the world’s neon gas (vital to produce semiconductor chips) and Russia producing palladium and nickel, used to create electric vehicle batteries and catalytic converters. Moreover, Russia is a large importer and exporter of passenger vehicles, so the war has forced manufacturers to halt production and exports to Russia and Ukraine.

The ongoing shortage of semiconductors and rare metals is likely to rollover into 2023, though, according to Mike Hawes of the Society of Motor Manufacturers and Traders (SMMT), the issue should ease in the second half of 2022.

Against all odds, battery operated electric vehicles are seeing an increased market share, rising to 10.9% of all UK new car registrations in 2022, despite a slowing pace of growth. This is great news for the electric car industry as it continues to thrive in a volatile market, offering more opportunities for both new car sales and electric vehicle servicing.

Whilst the road ahead seems bumpy and uncertain, Q Underwriting’s motor division, backed by A rated capacity provider, Aviva, is on hand to help. For more information on our offering, or if you have any queries relating to the story above, CLICK HERE.