New car supply issues may lead to innovation

With the continuing issues around new car supply showing no signs of easing in the near future what are dealers likely to do to be able to combat this? It is not quite as simple as just fixing a single problem. The obvious reason for the lack of cars is the scrappage effect; car makers were clearly overwhelmed with the global success of the various government backed initiatives and therefore put all their resources into supporting it. Now the scheme has long finished they expected the demand to fall accordingly, and although it is obviously less, it is not however as bad as predicted.

In other words where the new car market was predicted to be around 1.7 million units this year it will, in all probability, be around the 2 million unit mark.

Other reasons include exchange rate pressures. In the past the UK was seen as a great profit centre for European car makers due to the strength of the Pound. Now Sterling has clearly gone the other way, car manufacturers are putting more resources into their other, more profitable, markets. The car industry is a global one and in the great scheme of things if the UK suffers a few supply issues then unfortunately that is viewed as collateral damage.

What could also be an issue, and this is probably more an item for debate than perhaps a matter of fact, is that with component suppliers having been squeezed to the bone on margins and therefore operating on strict targets, as demand for new cars has been sustained the component support businesses have only got funding in place to support certain volumes and with the lack of fluidity in the banking sector have been unable to secure the extra funding required to keep up with demand.

Throw all these things in the mix and the net result across virtually every manufacturer is vastly extended lead times to the extent where we are just waiting to hear of a car which may take a year to be built if it hasn’t already happened!

To combat this franchised car dealers will be looking at their used car and aftersales operations to protect their bottom line in this volatile situation and that increases pressure on prices and choice.

To try and keep up with customer demand dealers will be keen to try and match cars with customers in ways they have perhaps not yet looked at. For example if they have a late plate used car on their forecourt and a customer would buy it if it had Sat-nav, parking sensors and leather trim the dealer will now have to be able to retro-fit these accessories in order to have an opportunity to gain a new customer and at the same time bring extra income into their beefed-up aftersales operations.

If buyers can feel confident of the quality of these aftermarket items and dealers can price them competitively it may lead to buyers being able to have the same kind of flexibility they have when “building” their own new car.

Of course although not all of the extra spec will be available as an after fit it would be great for customers to view a kind of menu of extras which they can add to the car and know exactly what it will cost and what it will look like.

If the price is right it could be good news for everybody.