7 million cars sold in the UK in 2014 making it the largest car market in Europe. Despite its seeming maturity it needs to undergo considerable change
London, May 15, 2015 – The UK’s used car market will need to undergo considerable change to keep up with buyers and sellers who are increasingly moving online allowing them access to greater information and pricing transparency prior to making a car purchase or sale, according to a report released today by global management consulting firm Strategy&, a member of the PwC network of firms.
Better access to information is easing the process of finding and buying used cars, making it particularly difficult for channel participants — franchised dealers, independent dealers, and online buying platforms — who have long depended on lack of transparency to prosper. Rapidly increasing use of mobile devices is also boosting this trend: more than 2% of all Web searches related to “used cars” are now conducted on mobile.
Looking ahead, car providers will also need to adapt to changing supply patterns. There is a lack of younger used cars, because the market for new cars is still struggling to recover from the 2008–2009 recession and its aftermath. As a result, in 2015, there will be 2.5 million fewer cars in the 3- to 8-year age range than there were in 2007, and it will take several years of strong new car sales to build up the supply of prime cars.
Rich Parkin, Strategy& Partner and report co-author, notes that: “Shifts in consumer behaviour, for example growing adoption of digital tools and technologies, declining interest in driving among younger, urban dwellers, and owners holding on to their cars longer (the average age of cars on the road has increased from 6.8 years in 2007 to 8.0 years today) will affect all participants in the used car market. Our report calls on UK providers to recognise that they have come to the end of one journey and acknowledge that they must now chart their next route.”
The report also found that increased transparency will put pressure on the margins of traditional dealers, forcing them to move online, which will provide a more convenient end-to-end buying experience to consumers. The transaction facilitators will also likely see their market share grow, but competition among them will increase, as will the pressure to consolidate. All of these trends point to significant disruption ahead which should prove good for consumers who will benefit from the increased competition and decreasing margins across the value chain.
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