The power of premium

I read some news on the second-hand car market recently and I couldn’t help but notice some parallels between the current state of the automotive sector and the retail glazing industry.

It turns out that demand for cars is at an all-time high, driven by lockdown savings (including those that would otherwise have been allocated for a foreign holiday) and a desire to keep up with the latest motoring technology.

This has created a bizarre situation where, not only have the most popular models on the second hand car market risen by 50% or more in the past 12 months (the average price of a used car has risen by 32% to nearly £18,000, according to Autotrader) but in the nearly new market for cars less than 12 months old, a fifth of all models are being marketed at or above the RRP for their brand new equivalent!

Demand for new cars is high but supply has been disrupted by a lack of semiconductors (the average car now uses 1,500 computer chips) along with big hikes in shipping costs of components and finished goods.

However, despite the disruption, some manufactures are reporting record profits, after channelling semiconductors and parts to assembly lines and models that are most profitable.

VW/Audi Group, for example, has diverted resources away from standard model production lines in Germany to the Bentley plant in Crewe. The margins on a new Continental GT being much more lucrative than a Polo or a Golf.

All of which echoes the high demand and supply chain issues of the glazing industry, and also increasing consumer desire to spend more on higher value products.

If standard white PVC windows are a VW Polo or Ford Fiesta, then foiled, mechanical jointed flush casements, timber and aluminium are the high margin Bentleys or Porsches.

It’s been said before, but installers and fabricators operating at the premium end of the market are going to be well placed to take advantage of market conditions going forward, especially as conditions are expected to become more challenging in the year ahead.