How has the rise in fuel costs effected consumer demand?
It is no secret that the cost of living has rocketed. The average living cost for a single person in the UK currently sits at £2,005 per month, and at least 60% of adults are spending less on non-essential items due to the rise in cost of living. And, despite fuel costs beginning to stabilise, in mid-October it was reported the price gap between diesel and petrol vehicles had reached 20p for the first time ever, making it £11 more expensive to fill up an average family car with diesel.
So, amidst this inflation minefield, we have used our in-house data to investigate whether these costs have affected consumer demand within the UK. We also sat down with our Data Director, Jon Ryan, to discuss if there was a correlation between the two, and if the automotive retail sector has made any changes to accommodate this increase for consumers.
During the height of the fuel cost crisis, the cost of petrol and diesel spiked, forcing consumers to spend 68% more on average, when filling up their vehicles. In fact, our proprietary Business Intelligence service found that the average price of petrol increased by almost 48% between September 2020 and September 2022. Meanwhile, the increase in diesel price was even more costly at 54% during the same period.
Jon Ryan added, “In line with these price hikes, demand for petrol and diesel vehicles fluctuated, but overall seemed to slow during the course of this 2-year period. Petrol vehicles saw a 16% decrease in the number of vehicles removed from sale, while diesel vehicles saw a much larger 37% decrease. Meanwhile, hybrid vehicles saw an impressive 36% increase in the number of vehicles sold during this time, and Electric Vehicles (EVs) saw the biggest increase of 94%. These results were apparent both online and offline, indicating just how important an omnichannel approach is to Retailers, who need to maximise their sales across a variety of channels.”
However, we wanted to take this one step further and find out if the automotive retail sector has made any changes to the pricing of their vehicles, in order to accommodate this transition in consumer demand. And it seems the answer is, no.
In fact, due to the recent Chip Shortage, prices for all vehicles have increased dramatically, and continue to do so. The average cost of diesel and hybrid vehicles rose by 26% between September 2020 and September 2021. Likewise, the average cost of a petrol vehicle rose by 12% with a spike of £29,687 (+42%) in October 2021. EVs also saw a 22% increase in cost, with the average currently sitting at £41,144. An intriguing statistic when you consider the rise in demand.
Despite more chips becoming available in this second half of 2022 and global vehicle production expected to increase by 7% in the 2023 fiscal year, many believe that the effects of this supply crunch will be felt until 2024, causing widespread and ongoing issues as ‘the available chips may not be the right type to satisfy demand.’
When we asked our Data Director, Jon Ryan, about the correlation between the rise in fuel costs and consumer demand, he stated: “While demand for petrol and diesel vehicles fell during the height of the fuel cost crisis, EV transactions soared both online and offline irrespective of the chip shortage. In fact, rise in fuel costs has encouraged many consumers to think carefully about their vehicle choice, sparking many of them to make the leap to electric. Automotive Transformation Group take pride in doing what we can to help Retailers cater for this demand. Our teams are working on an Electric Vehicle Calculator which will help consumers understand the true total cost of ownership (TCO) and how this compares to the cost of their existing vehicle.”
You can read more information about this update here. We look forward to sharing further insights from our Business Intelligence Service.