Peak car, also known as peak car use or peak travel, is being cited as having well and truly arrived. If you’re not sure what it is, it’s a hypothesis that fewer miles being clocked up by private drivers means that car use has saturated, and will now decline sustainably and predictably until it trundles to a stop altogether. The theory is based on reductions in the miles being travelled by car across the globe, but primarily in Australia, Belgium, France, Germany, New Zealand, the UK, and USA.
The reason it’s making news, especially as of recent months, is that changes in the US market suggest rather than being the dystopian future of automotive retail, it may in fact be its current reality.
One of the “indicators” that peak car is already upon us, is the shift in the US to used vehicle sales. But, there are many influencing factors driving such change too. Debt-laden millennials, the rise of UBER and ride-sharing, political and economic unrest, and even the expectation of self-driving technology to soon appear, are all impacting buying decisions.
However, it is how used vehicles are being bought, and by whom, that is driving academic claims that peak car is already happening, at least in the US. Prime credit consumers – those considered the highest quality of borrowers, accounted for 62%† of used car financing in the first quarter of 2019. That means the majority of buyers, even though capable of meeting new car affordability, are gravitating towards the used market.
The US new car market might also back up the suggestion that peak car is happening. General Motors’ new vehicle sales fell for the third year in a row in 2018, with Ford showing a similar trend. The luxury end of the market has also seen sharp decline, with sales of Aston Martin, Lamborghini and Rolls Royce taking pronounced hits. For the first time in five years, sales of light vehicles for 2019 in the US is expected to come in below 17 million units.
With Brexit uncertainty, and similar political and economic upheaval this side of the pond, the prediction is that we will soon be following in the US’ footsteps. So, have we been ignoring the signs, and is car use and ownership (and by association automotive retail), already going the way of the dodo?
Well, maybe, but probably not yet. The UK used car market is showing signs of a slow-down. 2019’s second quarter shows a drop of 2.8%, and sales have fallen by 1.7% YTD*. Both petrol and diesel models are showing a drop in sales, of 3.7% and 2.5%* respectively. Used car values also dropped by a record 2.2%* back in July. Significant reductions in sales in the north west, Scotland, and the south east have mainly been responsible for driving the decline.
But, we need to remember that disruption also brings with it opportunity. And it is the independent dealer that is best placed to rapidly embrace these opportunities. For franchised dealers and retail groups, adapting to shifts in buying behaviour isn’t so easy. With manufacturer and partner ties, changing their business model isn’t straightforward. For independents, who usually benefit from being privately owned and privately run, making instant decisions and trying new directions is much more possible.
If car usage and ownership is changing, then that doesn’t mean the days of automotive retail are numbered. But it does mean it will have to change too.
The Renault Zoe is currently the UK’s fastest selling vehicle. But, the majority of models moving off of used forecourts remains mundane. The Ford Fiesta, Vauxhall Corsa, Ford Focus, VW Golf, and Vauxhall Astra took the top five slots for the last quarter. But, that’s not to say a change isn’t on the horizon. Hybrid, plug-in, and electric models enjoyed the continued growth their sector of the used market has seen throughout 2019, with a 24.8%* increase. That equates to 33,492 units for the second quarter of the year.
The industry is certainly going to have to change, and it is also going to have to evolve to adapt to change driven by the consumer – something automotive retail doesn’t necessarily take to naturally. But, importantly, the consumer still wants to buy cars. How and what they buy is certainly in flux, but with the right platforms and partners, retailers have the flexibility and the tools to meet demand, in whatever form it comes.
*SMMT, August 2019.
† CFRA Research, August 2019.