The automotive aftermarket is an important part of the UK economy. It provides motorists with the choice over where and how they service and repair their vehicles. But as with other vital sectors of the economy, factors such as high interest rates, the geopolitical environment and inflation can make market conditions unpredictable.
In this week’s blog, FinCred explores the twists and turns ahead for the automotive aftermarket, and how you can navigate them successfully.
Automotive Industry Uncertainties
Research recently conducted by Atradius highlighted some of the concerns of the automotive and aftermarket sectors.
Extended Zero Emission Vehicle Targets
In 2023, the UK government announced a five-year delay on the ban of combustion engine vehicle sales. This extended the deadline to 2035. It followed concerns around high costs, lack of infrastructure and readiness of manufacturers.
US Strike Action
Ford, General Motors and Stellantis all faced operational disruption last year due to a sustained period of industrial strike action. The strikes were reflective of growing labour input costs across the UK. The disruption itself will have ramifications on production, as well as global vehicle availability and pricing.
Investment In Gigafactories
A number of gigafactories are currently under construction, including Envision AESC-Nissan‘s Sunderland plant. Although industry future demand is clear, battery production remains a challenging sector. UK firm Britishvolt are still looking for a new buyer.
Rules of Origin Delay
Tougher requirements on the origin of Electric Vehicle (EV) parts were due to be implemented by the UK government this year. The imposition of 10% tariffs, and tougher requirements on “rules of origin” are postponed until the end of 2026.
Red Flags
Alongside staying aware of shifting market conditions, spotting issues with existing or potential customers is also vital. Here are some red flags to look out for in relation to risk of non-payment or insolvency:
- Late Payments: Change in payment patterns, or letting payment times slip, can signal cash flow problems.
- Profit vs. Cash Flow: Be wary of a company generating large profits but little or no cash flow from operations.
- Late Filing of Accounts: Missing deadlines could point to issues within the company, or auditor involvement.
- Poor Performance: Be wary of whether a business can meet its financial commitments.
- Boardroom Instability: If there are surprise resignations at the board level, this can sometimes indicate trouble ahead.
You can read more on how to spot early warning signs in our recent blog on credit risk management.
Securing Your Future with Automotive Aftermarket Insurance
For any business that operates on credit terms, there is a risk that invoices are left unpaid or paid late. Automotive Aftermarket Credit Insurance protects your business from uncertainties in the market, and risks of non-payment of invoices. So if your customer can’t pay you, you’ll still get your money.
The best credit insurers get to know you and your business. They work in partnership with you, supporting you with up-to-date intelligence on markets and sectors. You can use this information to help explore new markets with confidence and offer competitive credit to customers.
Does Your Business Operate In The Automotive Aftermarket Industry?
Whether you are involved in vehicle aftermarket manufacture and remanufacture, distribution of automotive parts, servicing and repairing vehicles, installation of parts, we can offer trade credit insurance that protects your cash flow and minimises the risks to your business.
FinCred offers expertise and complimentary advice on trade credit risks to members of the Independent Automotive Aftermarket Federation (IAAF).
Contact FinCred today for advice on your trade credit risks or to obtain an obligation-free quotation for cover.
