In my now traditional Christmas column – insofar as I think I’ve written one before – here are my predictions for the motor trade in 2023.
While some are rather far-fetched, by the time the festive period comes around again, you’ll have all (hopefully) forgotten what’s written here and will forget to chastise me for getting it wrong.
Now I’ve said that, someone will diarise a mickey-taking session for December 2023, but I’m going to plough on regardless.
What’s that Baggott, you’re guessing depreciating assets will, er, depreciate? I hear you scream at your screens. Well, yes, that’s sort of what I’m saying. For the last few years we’ve been used to used car prices going up, but with a recession and cost of living crisis I think they’re likely to start to fall a little more in line with what we saw in ‘normal years’. That said, anyone waiting for a crash back down from the near 30 per cent increases they gained in 2021 will be bitterly disappointed. New car supply isn’t getting much better any time soon and this will help keep any fall gradual and relatively small.
Car finance rates are rocketing and in the States it’s already starting to cause problems. Over there used car prices are falling and it’s starting to create a few negative equity issues. While we haven’t seen much of that in the UK, what we have seen is APR rates rocketing. This is already feeding through to dealers and some have told me the renewal conversations they’ve having with customers for like-for-like replacement cars that are now costing far more a month are getting a bit awkward. Couple this with a cost of living crisis and people trying to cut their bills and there may be a storm brewing.
It’s been the strangest of purchases for the Tesla tycoon, with the will-he won’t-he saga of first buying it, to him eventually walking in the head office carrying a sink. The latter was for the purposes of a ‘joke’ telling his tens of millions of followers to ‘let that sink in’ as he arrived and proceeded to kick everyone out. Alright, less of the dad jokes Elon… Now he’s got the keys to the business he doesn’t really know what to do with it. It’s losing millions every day and he even asked his followers in a poll if he should stay on as CEO. Even they voted in favour of him stepping down and they’re supposed to be on his side. With Tesla shares plummeting I predict it’s not long before he moves his social media plaything on to someone else and goes back to the day job.
Talking of day jobs, and we move on to one person who’s been without one for most of the year. Former Marshall Motor Group CEO Daksh Gupta has been in the wilderness since Constellation took over his former employer and he left the business. On gardening leave, I predict tending to the roses will soon be something Gupta gets sick of and he’ll be back in the motor trade before we know it. I know he misses the deal making and, let’s face it, he was arguably one of the best in the business. Only a fool would bet against him reappearing soon… it’s anyone’s guess, though, as to where.
And that neatly segues in to my next prediction, that the secretive Constellation Group will soon make another bold move in the motor trade and buy something else. It already owns auction house BCA, car buying service We Buy Any Car, online used car dealer Cinch and more recently Marshall Motor Group. It has every piece of the motor trade jigsaw puzzle that, if run correctly, has the potential to return mega profits. Cinch, I’m not so sure, but I won’t go into that. Anyway, there’s already been murmurings Constellation sniffed around Pendragon’s recent bid and it already has a 25 per cent blocking stake in Lookers. I think maybe 2023, with share prices hit by a recession, Constellation could make another bold move.
Ok, so this might not happen next year, but if not in 2023 sometime soon. The plan to phase out the sale of combustion engined cars completely in just seven years time is simply too soon. And it’s not the industry that is lagging behind – the pace of introduction of electric cars is frenetic – no, it’s the infrastructure that is falling short. If you’ve tried to use a public charging point at any time in an electric car you’ll know what a nightmare it is. We’re drastically behind schedule. The rising cost of energy that’s already putting EV buyers off, and causing used electric car prices to fall, will be the ideal excuse for the government to delay the 2030 ban.
I think it’ll be third time lucky for Pendragon next year after two failed bids to buy the business in 2022. In the summer Lithia Motors from the US tabled an offer, but it was blocked by Hedin, who then showed its hand and made a bee-line for the Car Dealer Top 100 third placed firm. After getting an extension to make its offer, Hedin pulled out, but I wouldn’t be surprised if it was a negotiating tactic. Will they be back in the new year with a reduced price offer for Pendragon or will Constellation (see above) or someone else swoop in? My bet is Pendragon won’t be listed this time next year.
On the car manufacturer front, British supercar maker McLaren isn’t having the best of times. It’s sold its head offices and now its collection of prized F1 cars to keep the wheels turning on the production lines. McLaren needs desperate investment and a rumoured snatch and grab by Audi never failed to materialise. Rumours are they looked under the bonnet and didn’t like what they saw, but I’m sure someone soon will. McLaren is an evocative brand which rose from nothing to take on Ferrari in the supercar game. To an ambitious Chinese brand or the likes of Stellantis, the luxury car making star would be a feather in their cap. VW has made a success of Bentley, and BMW of Rolls Royce. I think it’s only a matter of time before the same thing happens to the Big Mac.
The online used car dealer has made yet more headlines in 2022 with its bold plans to ‘right size’ the business after posting yet more losses in the hundreds of millions. Fact is, it rinsed its coffers building a business that doesn’t really seem to work. For all the huge sports marketing deals and European expansion, at its core is a used car dealership that struggles to turn a profit. If it can’t manage to do that at a time most car dealers have enjoyed their best ever years, when the market freezes up in a recession will it be able to battle with the big boys? Its share price has tumbled 98.5 per cent to 13 cents, what the Wolf of Wall Street would bill as penny shares, and is now worth a paltry £79m.
What are your motoring predictions for 2023? I’d love to hear them. Email me yours using the email button below.
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