The automotive market has experienced significant disruption in recent years, for a wide variety of reasons. The UK’s departure from the European Single Market is often given as a leading reason for the disruption, with imports and exports becoming more difficult. However, there are other factors which have led to an extremely rocky few years for manufacturers and dealerships alike. What are they, and what might the future hold?
The Coronavirus Pandemic
The coronavirus pandemic had numerous impacts on the automotive industry, from manufacture to consumer habits and demand. Most obviously, stay-at-home orders for all but essential workers brought manufacture to a crawl.
Meanwhile, the adoption of furlough or remote working arrangements by the majority of businesses was a driving factor in decreasing car ownership. Some of this influence has endured even after pandemic restrictions eased, with the popularity of hybrid work changing many commuters’ relationships with private transport.
The Semiconductor Crisis
Concurrently with the pandemic, though, another global event severely impacted the automotive industry as a whole. Disruption to the production of silicon semiconductors in Taiwan led to a worldwide shortage, with rippling effects across tech industries. Bespoke integrated circuits are vital to the manufacture of new car ECUs and sensor systems; without new supply, new car models became harder to acquire – leading to an increase in demand for used cars.
Indeed, advanced executive models such as used Mercedes saw a significant uptick in interest, offering similar amenities to newer models at a lower overall price. However, the rise in demand for used cars also precipitated an increase in asking price for many.
Rising Costs
Speaking of which, rising costs have been something of a theme in recent months. The cost-of-living crisis has seen a number of costs for households rise, with both direct and indirect consequences for motorists and the automotive sector. The cost of petrol and diesel peaked in the middle of 2022, with prices per litre threatening to breach £2 in some areas.
Indirectly, the general increase in the cost of living has reduced household budgets significantly. Families with less spending power are less able to afford the running costs for their cars, whether maintenance or insurance. As such, car ownership figures continue to decline.
The Future
But what does the future hold for driving in the UK? Electric vehicles remain a promising entrant, as technology continues to develop and EVs become more affordable for smaller budgets. In the short term though, the outlook is less optimistic. Impending recession indicates a tough year for businesses and consumers alike, and a year in which many more will be battening down the hatches – including staving off larger investments in cars or maintenance.