Company layoffs and the cost of living crisis
The automotive industry, both retail and financial, is facing significant challenges in the wake of the current cost of living crisis. We recently wrote about the impact of the cost of living crisis on the automotive industry, click here to read about it. The rise in living costs has resulted in a decline in demand for vehicles, leading to a decrease in revenue and, in turn, layoffs across the industry. Some major companies affected include Solera Auto Finance, Cazoo, Upstart, Rivian, Waymo, Carvana, Lyft, and Ford. In this article, we will explore the impact of these layoffs on the automotive retail and financial markets and how changing consumer behaviour has affected these markets.
The current cost of living crisis has led to a decline in consumer demand for vehicles, reducing revenue for the automotive retail and financial markets. This decline in revenue has resulted in layoffs across the industry, with major companies such as Ford, Cazoo, and Solera Auto Finance having to cut jobs. The decline in consumer demand for vehicles and the subsequent decline in revenue has also reduced consumer confidence, as customers are wary of making large purchases during uncertain times.
EV vehicles
The rise in living costs has also led to a decline in the demand for electric vehicles (EVs). EVs are significantly more expensive to purchase and maintain than traditional vehicles, making them an unrealistic option for many consumers during these uncertain times.
Additionally, the UK government has pulled all grants surrounding EVs, further exacerbating the decline in demand for these vehicles. Many individuals can no longer afford to pay the costs associated with EV charging, as using a rapid charge point can be more expensive than petrol and diesel prices.
This decline in demand for EVs has also led to a decrease in the number of car finance lenders offering EV financing options, as the risk associated with lending for these vehicles has increased.
Let’s Talk About Tesla
Tesla’s stock fall of 65% in 2022 has caught the attention of investors and the general public. The electric carmaker’s stock plummeted after disappointing sales figures were announced, causing a 12% drop in a single day, making Tesla CEO Elon Musk no longer the world’s richest man. This fall in stock prices can be attributed to the overall decline in the stock market – some believe that Tesla’s stock was priced too high, to begin with, and is now trading at more realistic levels.
However, with no timeline for when Tesla’s stock will bottom out, investors are cautiously waiting for the next move.
Consumer Demand & Behaviour
Changing consumer behaviour has also significantly impacted the automotive retail and financial markets. With the rise in living costs, consumers are increasingly looking for ways to save money, including purchasing vehicles online. This shift towards online purchasing has also led to a decline in traditional brick-and-mortar dealerships as customers increasingly turn to online options.
The decline in consumer demand for vehicles and the subsequent decline in revenue has also impacted customer experience. As companies are cutting jobs and reducing costs, customers are likely to face longer wait times and reduced levels of customer service. This decline in customer experience can decrease customer loyalty, as customers are more likely to switch to competitors who provide better customer service.
The current cost of living crisis has had a significant impact on the automotive retail and financial markets. The decline in consumer demand for vehicles and the subsequent decline in revenue has resulted in layoffs across the industry and a decline in customer experience. Changing consumer behaviour has also significantly impacted the industry, with the rise in online purchasing and the fall in demand for EVs.
Outlook
In terms of the next 12 months, the current cost of living crisis will likely continue to impact the automotive retail and financial markets.
However, as the economy begins to recover, consumer demand for vehicles may increase, improving the industry’s overall health.
For car finance intermediaries, navigating these uncertain times will require a careful balance of risk management and customer service.
Intermediaries should focus on providing clear and transparent information to customers while also managing risk by diversifying their product offerings. By taking a strategic and customer-focused approach, car finance intermediaries can navigate these uncertain times and emerge stronger on the other side.