Market Review
Since our last blog, the market has now really divided into two halves of success and mediocre; LCV’s remain extremely popular attracting very strong pricing whereas the car market is now struggling with a real lack of demand at the forecourts.
Many car dealers have left a fair number of their staff on the Government furlough scheme, as they continue to operate as an online or ‘click and collect’ type of business which of course requires fewer sales and admin staff.
Car dealers tell us that there has been a steady trade throughout the pandemic, with just a small blip after the release of the 2nd lockdown in late November 2020; by then it was too late to capture any real volume of sales before the usual Christmas slowdown. Overall year on year used car sales are over 35% down across the board creating some log jams of used car stock at auction centres.
For the first quarter of 2021, we cannot see much improvement in the used car markets, with volumes coming back to market now at near normal levels, but with a continued decline in demand. Given those parameters, sales will continue to fall short of the relatively high CAP values on most models, particularly if there is any damage to the cars.
LCV Stock Remains Very Popular
For LCV stock it has been an entirely different story, with prices going up month on month from last summer culminating in nearly a 20% overall increase in values, year on year. For some vans it has been even more meteoric, such as the Transit Custom.
As an example of how prices have increased, a 2018 18 registered Custom 290 Limited van with 20000 miles was valued by the Guides at £14500 in January 2020, that same van one year on is now valued at a whopping £18100!
As traders tell us, having to pay that much for the van at auction gives them no real chance of retailing it under the magic £20000 mark, in order to beat the new prices. For that reason nearly new examples such as this are not quite getting to Book money, often selling for around £500 behind.
Generally speaking though, the LCV markets remain extremely strong due to a lack of stock coming through, particularly directly from fleet.
Given that shortage and a remaining strong demand for the product, prices will remain high throughout this first quarter of 2021 for most LCV stock.
Unlike used car forecourts, used LCV dealers tell us they are very busy indeed, especially in the run up to Christmas. As we have mentioned before, the parcels delivery market usually becomes extraordinarily busy this time of year but, with another Lockdown in place in early New Year this sector has gone into orbit! Hence anything from small panel vans right through to Luton bodied 3.5-ton vans are selling extremely well at auction, with the Vivaro/Custom market particularly strong.
For many this represents the ideal size of van, being of larger cube than the car derived vans such as Berlingo and Caddy, but not too large to sit on someone’s drive or outside a house
As they are also much more like a car to drive both the Custom and Vivaro are finding homes very easily at market, with older clean low mileage examples making fortunes over Book prices.
There is no slowdown in LCV tippers and dropsides either, with any clean examples making strong money in the market.
Add Euro 6 engines into this mix this creates even more demand for stock, because the slowdown in manufacturing of new stock created by the pandemic has seen lead times of over a year for specialist tippers and dropsides.
A consequence of that is that main dealers are very active at auction buying nearly new stock and paying handsomely to own it.
This almost new Mercedes Sprinter sold for well over Book values just before Christmas to a main dealer, who said this was exactly the type of stock they were looking for to retail; they actually had customers ready to buy it!
Everything remains very positive in the LCV markets, except maybe heavily damaged stock. Here the trade are less likely to be paying strong money although they do still want the stock.
Trucks are also selling very well indeed this month with little signs of the lockdown affecting values.
Like the vans, anything Euro 6 is the most popular but, even Euro 5 stock is selling well especially on something different, such as dropsides, tippers etc.
The export markets are alive and well too, with many older trucks finding their way abroad – this is particularly true of 6×4 tractor units which prove extremely popular at auction.
Also similar to the LCV markets, anything different in the truck world is also making very strong money indeed, such as dropside 6×4 trucks with big cranes fitted, at almost any age too. The more mundane trucks, such as 7.5 ton Boxes are still selling, but their prices are largely determined by the engine derivative, with only Euro 5 or 6 being acceptable now for further use.
The older trucks and some RCV’s are now readily selling for parts, breaking and scrap. Many, such as 8×4 Hookloaders are still making strong money, even at 10 years + old. Some would go for export but many would be broken for spares. The sale of trucks for breaking may, however be a short lived success as the price of world scrap prices are set to tumble. Largely as a result of the pandemic, there are millions of tons of scrap metal entering world markets from the shipping and aviation industry, from unwanted ships and planes.
Auction Sales
All auction houses remain on line only, with just Shoreham Vehicle Auctions opening their doors properly to invited dealers for a short window between lockdowns. Here at XBG we continue to manage those auctions remotely on line, ensuring that every asset obtains the best possible prices commensurate with the market conditions and any damage to the asset. It is working remarkably well though, with our ‘virtual rostrum management’ earning well in excess of an additional £120 per asset sold in this latest period.
However, the trade remain determined to bring down pricing to more manageable levels and will stop bidding as cheaply as they can. For cars this is working because of a lack of bidders but for LCV’s we are managing to get further bidding out of the (online) crowd, and enhancing sale values.
Coming Out of Lockdown
Once the UK comes out of the continuous lockdowns, hospital admissions and deaths as a result of Covid19 begin to decline, that could spur some much needed activity into the used car markets. However to temper any enthusiasm for a surge in demand, it is widely expected that a vast majority of the population could then turn their attention to the one thing that has been missing from their lives for over 12 months, holidays!!
Thus maybe that used car acquisition might have to wait even longer for many people, creating perhaps more issues in the used markets. Only time will tell, in the meantime we believe the markets will bump along with most stock finding new homes, as long as vendors remain realistic on pricing (appertaining to damage and mileage).
Pricing Issues Looming
Given the aforementioned Book values that have seen month on month increases since last summer, there is now the potential for some ‘price corrections’ to take place over the coming months. Inevitably that is going to bring prices down, something the trade will be very eager to capitalise on. Thus Vendors can expect a period where vehicles are not making ‘Book’ money as the markets adjust. Given the rather large cash advances on most stock recently, it will be very interesting to see how the Price Guides handle this sensitive issue going forward; hopefully they will not simply drop all prices over one month, which could create widespread panic amongst over valued forecourt stock and Leasing Company asset values.
Electric Vehicles
With a new Government target set for the elimination of ICE vehicles by 2030, the motor industry is now set to meet that target with the introduction of new electric vehicles.
They are making good progress too, with all marques now adopting hybrid/petrol technology ahead of full electrification. Tesla of course still remain at the forefront of EV technology and have recently announced yet further advances in battery technology, claiming further increases in both range and power outputs from their latest batteries.
However in reality, in order to meet this 2030 target (2035 for certain Hybrid models), there remains a mountain to climb in order for the wider population to embrace this technology.
From the point of manufacture the availability of so much cobalt and lithium needed to produce the volume of batteries remains in doubt, even less the rather pressing need to adopt environmentally efficient disposal techniques for old batteries. The UK has seen the first EV charging station open in Braintree, Essex, the first of many promises the company behind this refueling facility, Gridserve.
This first station is certainly impressive, with a full service area attached to it allowing the driver and occupants to eat and work or relax whilst the car is re-charged. A 20 minute recharge should provide the average EV with a 200 mile range.
For the average business user, used to completing an entire round trip on one tank of diesel or petrol, the need to stop for such long periods midway through the working day to recharge could create many issues of its own for business.
This is the first station and, of course many many more are needed and fairly quickly, as we enter the last decade of diesel and petrol manufacturing.
Home charging is also an obvious answer for many, but this cannot be achieved by simply plugging the car into a domestic supply. Fully compliant home charging systems will need to be installed, as they would at offices and workplaces too.
In addition to this charging infrastructure, the vehicle maintenance industry will also need to significantly invest in training and equipment to be ready to accept electric vehicles.
It will indeed be very interesting to see how this all progresses in the coming years, to enable us all to switch to a greener motoring world.