While vehicle sales are still significantly down from pre-pandemic levels, 28% down according to the Society of Motor Manufacturers and Traders (SMMT), lack of demand is not the issue. And that demand is primarily for Electric Vehicles (EVs), which accounted for 71.5% of new car sales in January 2022, in the UK.
On top of these new vehicles, SMMT reported a jaw-dropping 119.2% increase in demand for used battery electric (BEV) to 40,228, and a 75.6% rise in plug-in hybrid electric (PHEVs) vehicles to 56,861.
During February 2022, many online articles also discussed a Leasing.com (a UK leasing comparison site) finding that annual EV sales enquiries increased by 106%. These all point to a shift in the mindset of the vehicle owner / leaser.
Supply constraints for new vehicles boost the used vehicle market.
Vaccines were not the only thing boosted in response to COVID; the need for more telecommunication, electronics and computers saw demand for semiconductors – or microchips – skyrocket. This has had consequences for the auto industry too, with the ‘chip crises’ making headlines over 2021 – 2022.
The Automotive Industry was not historically a big player in the semiconductor market and also mostly follow JIT principles, which meant that high volumes would not have been maintained. Of course suppliers would favour profitability and relationships with bigger customers, like perhaps Apple and HP, when production came under pressure.
Some companies, like Tesla, managed to avoid the severe impact felt by others by changing their technology to be able to work with different supplier’s microchips.
Incentive to sell is good news for speeding up EV transition through used vehicle distribution
This constrained supply issue has bolstered the used car market, presented buyers with the opportunity to transition from petrol and diesel cars to cleaner options.
This high demand and low supply of new vehicles means sellers can name their price, and this incentive may well also speed up the replacement of petrol and diesel vehicles on the UK roads as more EVs are sought and sold in the secondary market.