Low buyer confidence causes -4.6% decline in new car market

The UK new car market declined by -4.6% in May with 183,724 units registered.

Figures from Society of Motor Manufacturers and Traders (SMMT) show that declines came across all sales types in the month, with registrations by private consumers, fleets and business buyers declining by -5.0%, -3.0% and -29.0% respectively.

Executive and dual-purpose vehicles bucked the trend, with registrations growing 9.1% and 16.0%.

Demand for superminis and small family cars fell, but remain the most popular taking a combined 56.3% of the market.

The SMMT says that the fall reflects continued uncertainty over diesel and clean air zones as well as the removal of incentives for plug-in hybrid vehicles.

A modest growth in registrations of petrol (1.0%) and alternatively fuelled vehicles (11.7%) did not offset a significant decline in the demand for diesels, which fell for the 26th consecutive month.

Petrol electric hybrids increased in demand, up 34.6% to 7,785 units. Battery electric cars also recorded a significant rise of 81.1%, but only represent 1.1% of the overall market.

However, following recent trends, plug-in hybrids experienced another substantial decline, down -40.6% in May and -25.1% year-to-date.

This compares with a 36.2% increase in the first five months of 2018 and is further evidence of the removal of the purchase incentive for PHEVs.

Mike Hawes, SMMT chief executive, said, “Confusing policy messages and changes to incentives continue to affect consumer and business confidence, causing drivers to keep hold of their older, more polluting vehicles for longer.

New cars are safer, cleaner and more advanced than ever and, with sophisticated safety, efficiency and comfort features as well as a host of attractive deals on offer, there has never been a better time to invest in a new car.”

Ian Plummer, commercial director at AutoTrader, added: “One of the effects of Brexit on the economy has been a hit on the exchange rate. As sterling falls, car brands don’t see the UK as such a profitable let alone stable market.

“As such, the UK is running an ever greater risk of not getting its share of the most desirable cars coming off international production lines; too many of the most sought after vehicles will be going elsewhere in Europe.

“That situation could last as long as demand holds firm in the other key European markets; and today they’re generally looking positive.

“In the current uncertain climate and with contracting margins, retailers and brands are struggling to hold prices and to incentivise sales; they simply don’t have enough money to encourage consumers who already aren’t confident leaving the industry in limbo.

“We need to take away the uncertainty, make sure that there is a positive case for change and give consumers more carrots than sticks.”

Sue Robinson, director of the National Franchised Dealers Association (NFDA) said: “The continued decline in new vehicle sales reflects the current political and economic environment. Consumers will continue delaying decisions on major investments such as new vehicles until we have greater clarity.

“Pleasingly, despite the decline in new vehicle sales the used car market continues to perform strongly demonstrating that the consumer still has options when it comes to purchasing vehicles. Franchised retailers continue to benefit from the growing used vehicle market and the associated aftersales segment.

“We will continue to support franchised retailers through this unprecedented period of political uncertainty and continue to call on the government to provide clarity for the UK automotive sector.”

[source: Motor Trader online]