VUCA, an acronym that stands for volatility, uncertainty, complexity, and ambiguity, is likely to be the next big buzzword for the automotive industry as a result of Covid, according to the market analysts at Cox Automotive.
VUCA is used to describe the situation of constant, unpredictable change that is now the norm throughout several industries as businesses gear up for a new year that continues to provide challenges to all organisations.
Cox analysts say we will have to get used to a VUCA trading climate for some time yet.
Given the industry’s outlook in a post-pandemic world, Cox says ‘we expect VUCA to continue’.
Philip Nothard, Insight and Strategy Director at Cox Automotive, said: “Since the coronavirus pandemic began, the automotive industry has been grappling to navigate the constantly changing headwinds. The old days of retailers typically making a profit in Q1 and then focusing on maintaining profit in Q2 and H2 are gone. From manufacturers to independent motor dealers, businesses must acclimatise to a new norm. Additionally, the use of digital has disrupted the industry, and so have changing market dynamics. What used to be seasonal norms no longer exist as everyone adjusts to a completely new trading climate.”
From a US retail perspective, Cox says the new normal for 2022 is likely to centre around retailers’ focus on margin retention and profit. Dealers, Cox notes, can no longer rely on chasing volume because it is simply, for now, not available. Therefore, dealers enjoy strong demand for vehicles and are less likely to offer discounts to consumers. With demand likely to outstrip supply of vehicles for some time, Cox Automotive’s view is that the market will not return to pre-Covid norms.
Nothard added: “We will see the market softening in time, but there is no tsunami of product on the horizon for two reasons. Firstly, because producers of semiconductors don’t expect normal conditions to resume until 2023 and secondly, because the types of vehicles entering the wholesale sector are not the same experienced in pre-pandemic times.
“In the first days of 2022, leaders of businesses will be wondering how to get through another year of unpredictability. The advice of Cox Automotive is to adapt to VUCA and embrace change. The expected rise in energy bills will continue to hit disposable incomes, there remains no end in sight to inflation, we will experience further digitisation of retail and digitally assisted sales, changes in the way OEMs retail new and used cars are accelerating, a rise of subscription/mobility products is imminent, and we will continue to shift to EVs as the year 2030 nears. To adapt to this, businesses must be resilient, continue to price cars correctly, market them properly, image and promote them properly, and make the best of the new norm. That way, their products will remain attractive to consumers, despite changing market forces in the background.”