INDICATA White Paper highlights the impact of Covid-19 on Europe’s used car industry (rental & leasing)

Analysis reveals how the used car industry is responding to different stages of Covid-19 including the potential impact it will have on the daily rental and leasing sectors

INDICATA, the global leader in used vehicle pricing and market analysis has released a new free-to-download White Paper which looks at the short, medium, and long-term effects of Covid-19 on the European used car industry, particularly rental and leasing companies.

INDICATA analyses nine million used vehicle advertisements across Europe each day which enables it to gain a strong view of demand and retail market pricing by country which gives vendors the earliest warning of market issues such as Covid-19 or opportunities.

By analysing the number of vehicle adverts removed from the internet, INDICATA data assessed consumer used vehicle sales activity. Northern Europe saw a sales fall of 21.5% between 11 and 18 March, while southern Europe, including Italy fell by 44% during the same period.

The White Paper can be downloaded for free at www.indicata.com/corona

Here are some of the market changes by country in more detail:

^INDICATA data shows used car sales rates in Italy, France and Spain. Italy’s dramatic fall in sales is clear, Spain’s volumes are beginning to ease, and the French market has started to fall.

^Comparing the UK and Germany, data shows the former is showing a small market fall, while there is a more visible downward step change in German sales volumes.

^The variances between medium sized countries shows some impact in the Netherlands and Sweden, while Poland and Turkey are yet to be impacted due to having lower infection rates.

^ Looking at Europe’s smaller countries there is a marked difference between markets. Austria closed its border with Italy on 11 March and the impact has been instant. Denmark and Belgium have implemented strong sanctions and the effects are showing.  Portugal declared a state of emergency on 19 March and we can expect car sales to fall quickly

^ Looking at Europe’s smaller countries there is a marked difference between markets. Austria closed its border with Italy on 11 March and the impact has been instant. Denmark and Belgium have implemented strong sanctions and the effects are showing.  Portugal declared a state of emergency on 19 March and we can expect car sales to fall quickly.

^Our data shows the correlation between infection rates and the fall in used car sales between 11-18 March versus the same period in February. We have compared this to infection rates per 1m of population. Countries like Poland and Turkey, with low infection rates have been least affected. As the virus progresses so re-marketers will need to know the country-by-country market trends to identify the most effective sales channels.

Andy Shields, INDICATA’s global business unit director and White Paper author said: “The relationship between the increase in the number of people with Covid-19 and the measures each individual government introduces to fight the pandemic is already having a detrimental impact on European rental and leasing companies.

“Countries will have different challenges at different times and it’s all about equipping companies with the right data to help assist them in making fast decisions, which is where our pricing insights comes into its own. We look forward to bringing you regular country data soon,” he added.

The White Paper also looks at how the last recession played out for both the new and used car markets across Europe and how those same trends may repeat in a world dominated by Covid-19. In addition, the Paper explores how China is getting control of infection rates, and how this may provide learnings for Europe.

Andy has looked into Covid-19’s potential impact on rental and leasing companies by using live market data and historical insights into previous recessions.

Rental companies

Rental companies will have contracted the majority of their annual volumes with OEMs by now so will need to re-assess current contracts. In many cases contracts will be defaulted on, such is the loss of demand in the rental industry.

This will leave OEMs with a stock of unregistered, and in some cases registered ready for delivery new vehicles the rental industry does not want. In addition, de-fleets will be happening, and rental companies may try and hold risk vehicles until after the initial social distancing. However, when there is significant volatility on demand and differences between country the capacity to absorb stock at any one time becomes more challenging.

EU rental company remarketing operations should be flexible in which countries they remarket vehicles in. This requires four capabilities:

• The ability to open new markets quickly with a restricted infrastructure in place
• The ability to quickly expand buyer-base locally and find new channels to market
• The ability to remarket in multiple countries simultaneously
• The ability to identify what’s happening in markets with sales rates and live pricing data

Leasing Companies

The challenge for the leasing industry will be to manage the current volatility in the market whilst respecting the fact that there may be no short-term recovery in RVs. In 2008/9 many leasing companies extended vehicle contracts. With the risk used vehicle prices will be depressed for an extended period, an immediate run on vehicles may not be ideal. Even so, vehicles will still need to be remarketed over the downturn.

With countries implementing and easing restrictions at varying times, logistical flexibility and sound market data will be key to success. Remarketers and fleet planners will need the ability to:

• Identify the changing fortunes of country markets or segments
• Monitor retail market dynamics that will quickly cascade into trade market opportunities
• Quickly expand channels and countries of remarketing

Go to www.indicata.com/corona to download the 18-page White Paper in full.