29 Apr 22

Used-car shortage: "Difficult market, lots of opportunities"

If you’re a used-car professional and you want vital statistics plus expert insights, Fleet Europe’s Remarketing Expert Track is the (online) place to be. As was demonstrated once again this Thursday, when a few hundred attendees tuned in to a virtual session, focused on: Limited Used-Car Supply: Will it ever change?

You can’t step into the same river twice, the Ancient Greeks knew: the water’s changed, and so have you. Something similar applies to the Europe-wide remarketing industry. After two years of crises, the consensus is pretty strong that vehicle supply will never again be as it was. But then again, neither will remarketers. 

“Record profits”

In a first session, Marc Odinius (CEO, Dataforce) examined whether and how much sales channels across Europe have drastically changed. Some interesting observations:

  • Despite the plethora of crises, “OEMs are doing great, posting record profits.”
  • In most markets, SUVs are now the dominant segment. This has implications for motorisation mix, as “OEMs tend to put more EV models in their best-selling segment.”
  • The alternative-drive vehicle segment is very resilient. After the traditional New Year’s dip, they were back at 32% in March, up 9.1 percentage points over the same month last year. 
  • Another measure of where the market’s headed: “In 2017, there were just 8 BEV models that sold more than 5,000 units across Europe. In 2021, there were 40. In all, more than 1 million BEVs were sold.”

“Once BEVs and PHEVs are the norm, supply will bounce back. I don’t think it will take five years,” Mr Odinius concluded.

“Been here before”

Next up, Steve Young, (Managing Director, ICDP) discussed key changes in OEMs’ business model. Echoing Mr Odinius – and Harold Macmillan – he said the worldwide auto industry “never had it so good.”

“OEMs and dealers are having a great time at the moment, and that’s certainly not what anyone expected two years ago,” he said. Mr Young put today’s efforts at rebalancing automotive supply with demand in a longer-term context. “We’ve been here before. We did this in the late 1990s. But the lessons we learned were forgotten when money supply became cheap again.”

In Mr Young’s view, there is a “better than 50/50 risk” that new-vehicle supply will once again be managed against demand instead of production capacity. 

Another pertinent observation, going against much received wisdom: “More than 90% of customers want to use dealers at some point of their customer journey – even if at different stages. Which means online-only channels miss a huge part of the market.”

“Eat what you kill”

Leasing, in its many forms, will see a huge increase, also among private customers. “This means customers will have little say on aspects like maintenance or remarketing. And the pressure will grow on OEMs to ‘eat what they kill’, in other words: to remarket the vehicles they’ve sold in the first place.”

It goes without saying (but it bears underlining) that this evolution bodes ill for independent used-car dealers.

Philip Nothard, Insight & Strategy Director at Cox Automotive International, asked the question: How will these changes affect used-car supply? He noted that “there have been over 31 million fewer vehicles produced since 2018. We do believe supply will get better, but those 31 million we’ll never get back. They will continue to influence the remarketing industry for years to come.”

  • Interesting factoid: “In 2020, there were 330 million used vehicles in the EU plus the UK, of which about 300 million used cars, and 30 million used LCVs.”
  • Interesting evolution: “Rental car operators are now becoming significant used-car buyers.”
  • Interesting prediction: “I believe we will enter a hydrogen and EV market, just like we’ve had a diesel and petrol market.”

Both Mr Nothard and one of several online polls conducted during the session confirmed that most remarketing professionals don’t think we’ll return to pre-pandemic (over)production levels. 

Microsoft learnings

Léa Chevry (Co-founder, Tchek – event sponsor) acknowledged that used-car pricing is very complex, and suggested one solution to the supply challenge currently occupying the minds of remarketers across Europe: time-to-market optimisation. One option to achieve this is Tchek, a smartphone-based inspection tool that boasts a 97% detection rate, produces detailed reports in under a minute, and thus significantly reduces the time between individual car inspections. 

Next up was Michael Pohl, Senior HR Benefit Programme Manager at Microsoft. The tech giant has set itself the goal to be CO2 emission negative by 2030, but of course has had to deal with all the other recent challenges that we’re familiar with – in particular the supply constraints for new vehicles. He presented some of the learnings from the Microsoft fleet:

  • “Communicate in full transparency. Don’t hide anything! Nobody wins when deliveries are delayed.”
  • “It’s sometimes advised to add additional OEMs but that does not solve the problem; what does help, is adding other forms of mobility.”
  • Also useful: “Building your own car pool, where possible and applicable; extending lease contracts, but not as a standard; and allowing employees to move towards cash allowances.”

In a closing panel on the future of used-vehicle supply, the speakers were joined by two further experts. 

“Stay flexible”

“I’m a bit skeptical that OEMs will keep down volume,” said Jost Dieckhaus (VP Remarketing Europe, AUTO1 Group). “But things change fast; we have to stay flexible. That is, by the way, how we managed to increase our volume – by flexibly adapting our price levels, and diversifying our sourcing.”

Brian Madsen (International Director, Cars2Click): “We use geopricing, to identify slow-moving vehicles in one market, which are fast-moving in another. That is how we find a lot of opportunities, even in a difficult market. And we’re ‘pre-selling’ used cars: we’ve already identified cars that will go onto the used market in September, and already have a buyer waiting for them.”

In his closing statement, event moderator Johan Verbois (Remarketing Expert, Fleet Europe) summed up the main points of this Remarketing Expert Track: “Both our polls and our speakers point to the fact that the used-vehicle supply situation will not go back to how it was before the pandemic. And while it may currently be easy to sell used vehicles, remarketers should use this time to start re-inventing themselves for the future, when things will again change.”

Image: Fleet Europe

Authored by: Frank Jacobs