AFVs: Getting the digital push

Digital B2B marketplaces are supporting the rise of alternative fuel cars

Published:  31 August, 2022

By Phil Bird, Executive Director, NovaFori

It may be a coincidence, but there was some COP26 pull-through into the UK car market in December when, for the first time ever, sales of alternative fuel vehicles (AFVs) exceeded those of petrol-fuelled conventional combustion engine cars.
Normal business resumed in the first two months of 2022 as conventional cars retook their lead, but December’s sales figures are a taste of what is to come. In 2030, the sale of new diesel- and petrol-fuelled cars will no longer be permitted for sale in the UK, and the process of moving away from combustion engines is moving ahead. The rise in demand for electric vehicles (EVs) and AFVs exceeds that for petrol-fuelled cars, albeit from a lower base.
But this new trend is set against a troubled backdrop for the automotive sector. The sharp rise in fuel prices has compounded the impact of severe supply chain bottlenecks, all of which have distorted market fundamentals. But while the trickle-down effect is inflationary pressure and sub-par market efficiency, it is a situation that could be mitigated, if not fixed, with a rethink of the actual marketplace.
The dysfunction of new car sales is echoed in the second-hand market where the price of second-hand cars is now in many cases exceeding that of new ones. In the year to February, used car prices rose 32%, according to Auto Trader UK, with more than one in five (21%) of the nearly new cars currently available (those aged up to 12 months) more expensive than their brand-new equivalents.
As a further illustration of the current state of the market, some 17,045 vehicles in forecourts were repriced every day in February, with 2,424 retailers saying they made daily price adjustments.
The price rises seen across the automotive sector inversely correspond with the drop in sales due to a shortage of supply. Car manufacturing in the UK totalled 68,790 in January, down 42% from January 2020, just before the pandemic hit. Registrations in January were 115,087 down 23% from a couple of years earlier.  February posted a 26% drop to 58,994 vehicles since February 2020.
Of course, it is not entirely a supply problem. Buyer behaviour plays a part. Car buyers seem to be unable or unwilling to wait for a brand-new car to become available, thus their interest in the second-hand market. Imagine what could be achieved with greater transparency on delivery times, alternative options, better pricing for those who wait and so forth.
The growth of ultra-low emissions zones in cities around the country, plus that 2030 deadline, has spurred purchases. Alongside that, interest in EVs will only have risen as a result of the spike in petrol prices.  
The good news for motorists, who have struggled to find the type of car they want in a cost-efficient way, is that change is coming that will benefit distributors, sellers and consumers. The current market pressures are bringing about transformation towards new digital tools for selling second-hand vehicles.
Online B2B marketplaces are driving the development of the second-hand car market, enabling greater competition, liquidity, wider distribution networks and easier price discovery, alongside data-driven insights that benefit all parties using the marketplace.
Digital marketplaces create more options for EV and AFV sales. For EVs, such marketplaces bring transparency, more information and elements of price discovery not readily available before to help buyers. Given the surging prices of raw materials for EV batteries, greater awareness of the options available, along with prices and availability, could make a material difference to the cost of a car. By extension it can help more transactions to complete.
The more sophisticated online marketplaces help mitigate the effect of shortages and market disruption. For example, NovaFori has developed an auction platform for the B2B used car sales market, allowing sellers to remain competitive across various countries and enabling 24/7 trading for thousands of concurrent bidders.
The online marketplace includes access to an integrated inventory of thousands of vehicles, meaning professional buyers can browse and purchase vehicles. The platform uses data science to implement recommendations based on historical buyer behaviour patterns. Recommendations can also be refined based on substitutions and bids won, resulting in a superior customer experience.
All this boosts trade volume and liquidity, helping both the marketplace and sellers on the platform to generate more revenue. Professional traders can bid on a wide variety of cars in multiple languages across multiple regions in Europe. As a result of the combination of auction mechanisms and cross-border trade, marketplaces can deliver demonstrably higher prices.     
As demand for AFVs and EVs grows against a backdrop of a scarcity of supply and long waiting lists, digital platforms can play an invaluable role. Additionally, recommendation engines can most efficiently satisfy latent demand.
While there are no overnight fixes to the current market distortions, digital B2B marketplaces do offer a means to bring transparency, liquidity and efficiency to the second-hand automotive market in which the pressure of high demand for EVs and AFVs will remain a factor for the foreseeable future.

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