20 Mar 20

COVID-19: “No need to reduce residual values”

For now, it’s coronavirus 1 – vehicle remarketing 0. But when it’s all over, the sector will get a boost, says Wolfgang Reinhold, president of the European Car Remarketing Association (CARA). 

“Everything’s very quiet. There’s no travel or transport, well almost none: the radio still mentions congestion around Düsseldorf, but it’s only 20 to 30 km in total instead of hundreds,” says Mr Reinhold, painting a picture from his home in western Germany of a country – and a continent – slowing down towards standing still. 

Four to six weeks
The same applies for most industries, including vehicle remarketing: “Business is winding down. Transport is limited. Most shops are closed. That includes car dealerships and registration offices. Car manufacturers will shutter production, so no more deliveries.”

Whatever limited remarketing activity is still ongoing throughout Europe will in all likelihood end for the time being, Mr Reinhold says. But through the quiet weeks ahead, he already sees the contours of a hopeful future: “When we see the situation in Wuhan, where the new cases have been reduced to zero and normal life is returning, we may assume that our extraordinary situation on Europe may be over in four to six weeks.”

Running costs
That’s a period that can be bridged, thanks to the industry’s own resilience, in concert with employees and, if possible, with assistance from the various national governments. “Employers have running costs. In order to mitigate those, some will agree with their staff to take unpaid holidays. Others may be able to benefit from state aid. But my expectation is that everything will return to normal relatively soon. Some companies may fail. But most will survive.”

Of course, ‘normal’ will be relative. And here is a chance for remarketeers. “The manufacturers will take some time to get their production back online. Meanwhile, there will be a demand for vehicles. This crisis is not like the one in 2009, when that demand was lacking. So people will turn to the used-vehicle sector to satisfy their need.”

Prepare for boom
Specifically, that means two things, says Mr Reinhold: “One, remarketing professionals must prepare themselves already now as best they can for a boom in demand when the situation normalises. And two, because there will be enough demand, they must resist the temptation to reduce the residual values on their vehicles in order to get them moving. There is no need to gamble with residual values – remarketeers need the money too.”

Keeping in mind the crash of oil prices, will demand in the ‘re-normalised’ future tilt back towards used petrol and diesel cars, away from EVs? “I don’t think so. Your desire to buy an EV is motivated by whether you fit the profile and have the infrastructure. As to the price drop of oil: don’t forget that it can – and will – go up again.”

Main image: Shutterstock

Authored by: Frank Jacobs