Dealers are open again - but who wants to buy a car?

Alan Tovey
Car dealer post-Covid

Thanks to the lifting of lockdown restrictions, car dealers reopened their doors to customers on Monday – but mainly by appointment to avoid overcrowding.

Showrooms are generally spacious, making it fairly easy to adapt to social distancing measures such as one-way systems to control the flow of people.

With 117 showrooms, Marshall Motors is one of the country’s biggest dealer groups. Daksh Gupta, chief executive of the business, toured several of the company’s outlets on the morning of their reopening.

He described customers as “unanimously sympathetic and supportive of what we are doing”.

Gupta added: “Anxiety is understandable but customers and staff are delighted that we are back to selling. They know that we’ve got to get our business and the economy back up and running.”

Industry statistics since dealers were ordered to close because of the lockdown have been dire. March saw new car registrations plunge 44pc to 255,000 vehicles, with a near-total collapse of 97pc in April to just 4,321 cars.

The Society of Motor Manufacturers and Traders (SMMT) had been pushing for dealerships to reopen, calculating that each day of closure cost the Treasury £61m in lost taxes and the support for furloughed workers.

However, the trade body also warned that 2020 is going to be a very bad year for sales, predicting just 1.68m new car registrations, down 27pc on the previous year and the lowest since 1992 when 1.59m new cars were driven off dealer forecourts.

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However, there are so many unknowns that any prediction is, at best, an educated guess.

One bearish voice is Ian Henry of AutoAnalysis, who believes that drivers could hold off making big-ticket purchases. He says: “There are macro-level issues such as hidden unemployment which will only translate into real unemployment when support such as the furlough scheme ends.”

But for those handing over keys to new cars on Wednesday – from an appropriate social distance – there were reasons to be cheerful.

Marshall’s Gupta says: “It is going to be challenging but of course I’m going to be positive and there are real reasons for that. One is that we’ve got pent-up demand because people haven’t been able to buy a car for so long. We sold 3,700 cars online or by phone over the lockdown. Normally we’d do 19,000 in that period, so there’s a backlog there.”

Motorists’ current finance deals on cars will also have expired during the lockdown or be close to ending, and this will drive them to make a decision about transport, adds Gupta. 

With increasing worries about using public transport because of coronavirus, surveys have shown those who can afford to drive are unlikely to abandon cars for the bus or train. Indeed, many who do not have a vehicle have indicated they hope to buy one as an alternative to mass transit, with enquiries about cheap used cars on the rise.

One-way system in car dealership 

Another person operating in the post-Covid new world of retail is Terry Anderson, general manager of the Wimbledon and Crawley showrooms of Robins & Day Vauxhall.

He describes buyers visiting his dealerships as “being blown away” by the precautions in place.

“We have significantly less people on site throughout the day versus a supermarket but the precautions we have in place are far greater,” says the dealer boss.

One big change for the car industry is that test drives will no longer mean a member of sales staff sitting alongside prospective buyers, something Anderson says will be a benefit for both customers and dealers.

“You will really be able test the vehicle without the pressure of having someone sitting there observing your every move,” he says. “You can talk freely about the car.”

It will also ease pressure on dealerships, which he says can be forced to leave potential customers kicking their heels when sales staff are out on test drives. 

Another addition is “job loss protection waivers” on new cars to give drivers confidence to make such a major financial commitment.

There’s no doubt that some factors will lift demand in the short term. The medium term is far less certain. Andrew Burn, KPMG’s head of automotive, echoes warnings about the impact that furlough schemes, with their end “likely to drive low consumer confidence and low car sales”.

He adds there have been “indications of significant discounting” during the lockdown to stimulate sales, but this doesn’t necessarily mean that those ready to venture into a showroom will be able to pick up a bargain.

Manufacturers have warned that restarting production and getting it back to anything like normal levels is “demand led”. Put simply, they aren’t going to make cars they can’t be sure of selling. 

With factories running at low output rates, buyers could outnumber supply.

As the Telegraph’s own motoring consumer champion Honest John warns: “While logic might suggest that there will be bargains galore, in reality you are unlikely to get a fantastic deal on a new factory order that still has to be built. You may get a discount, but it will be a discount on a higher price than the car was listed at six months ago.”