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2024: The Outlook

Date: Mon 8th January 2024   |   Author: Natalie Ridgwell

Written by Mike Edwards, Chief Sales and Marketing Officer

After an eventful 2023, thoughts are turning to the next 12 months and I’m feeling cautiously optimistic for what 2024 has in store for our industry.  

You won’t need me to tell you that it’s likely we’ll see a mix of both challenges and opportunities. Having spoken to clients and reviewing some of the latest trade media, challenges to overcome in the next 12 months have been noted as; 

  • The continued pressure on the cost-of-living 
  • The new car market returning to a ‘push’ model in 2024, ‘as carmakers battle slowing retail sales’ 
  • The ZEV mandate 
  • Used car value realignment 
  • FCA Consumer Duty activity  
  • Cyber security 
  • Switches to an agency model 

All of these are valid, but I prefer to focus on the good news ahead. I base this on that most precious and sometimes fragile commodity: growing consumer confidence. 

According to the long-standing GFK Consumer Confidence Survey published on December 15th, consumer confidence is rising. In fact, it is rising on all five of GFK’s metrics. 

  1. General Economic Situation - up five points at -44; this was 22 points higher than in December 2022.   
  2. Personal Finance situation over the last 12 months was up two points to -14; 14 points higher than December 2022  
  3. Personal Finance situation for the next 12 months was up one point to -2; 27 points better than December 2022. 
  4. Major Purchase Index – up one point to -23, 11 points higher than December 2022. 
  5. Savings Index - up two points at +27; seven points higher than in December 2022.  
  6. The personal financial situation outlook for the year ahead is particularly encouraging. 

The Broader UK Economy 

Inflation is expected to continue falling as 2024 unfolds. However, the pace of decline is slow as businesses try to sustain or regain margins. Add to this the wage rise/inflation vicious circle not seen for many years in the UK, and for the first time in a number of years, the likelihood of an increase in unemployment may surface. 

Lowering inflation is the key to lower interest rates. Right now, the Governor of the Bank of England has worked to dampen expectations of any falls this year. 

The net result of the fiscal squeeze is that GDP growth, which exceeded most forecasts in 2023, is expected to be modest. KPMG’s latest Economic Outlook suggests growth of 0.5% in 2024. 

Reasons for Optimism 

Despite the challenges and accepting that, as we have seen over recent years, global events can throw the world a curve ball or two, I do see reasons for optimism in the car retailing sector. 

Inflation has peaked and is declining, and interest rates are likely to stay flat or start to fall back. Add to this a small rise in disposable income for many people, with wage growth exceeding inflation over recent months. The net result is gently increasing consumer confidence and buying power overall, albeit for some people, the cost of living crisis will remain a key issue.  

In the motor industry, new car sales are forecast to rise, according to the SMMT, and there is the possibility that new car prices, notably Battery Electric Vehicle (BEV) prices, might decline.  The Zero Emission Vehicle Mandate, which restricts the volume of ICE cars that can be sold (22% of new passenger car sales are required to be zero-emission in 2024), is likely to see a more significant product push on BEVs, and price may well be a powerful lever in this regard. Adding to this, we expect to see a surge in cheaper Chinese imports. 

In the used car sector, increasing the availability of new – 3-year-old cars will be helpful, and we have already seen dealers' agility to pivot to older used vehicles to meet consumer expenditure plans in recent months. Again, in terms of confidence, I’m encouraged by Autotrader data in mid-December, which reported that consumer demand was up 10.7% on December 2022 and fast turnover in used stock. Helpfully, this demand was also helping to stabilise the softening in used car retail prices seen in recent months. 

Like any year, 2024 will have challenges to close, but increasing consumer confidence and car retailer agility are likely to be a good combination. When it comes to agility, all of us in the supply chain need to embrace this dealer strength, and indeed, across AutoProtect Group, it is an ethos we continue to build into our model. F&I is changing, and the role of value-added products is evolving.