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New cars in a showroom

Company cars and EVs drive November market

Tuesday, December 6, 2022 - 07:10
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The UK new car market grew 23.5% in November to 142,889 registered units in the fourth consecutive month of year-on-year growth, according to new figures published today by the Society of Motor Manufacturers and Traders (SMMT). The growth delivered the best total for November since 2019,1 with manufacturers continuing efforts to fulfil orders amid erratic global components supply. However, registrations in the month were still -8.8% below 2019 levels and, while further recovery is anticipated in 2023, global and domestic economic challenges mean that the market will remain below pre-pandemic levels.

Registrations by large fleets energised the market, up 45.4% compared with November last year. Demand from private buyers also grew, albeit by a more modest 2.7%. Business registrations more than doubled, meanwhile, up 112.2%, but remain a small fraction of the overall market.

Zero emission vehicle uptake continues to grow, with newly registered battery electric vehicles (BEVs) up 35.2% to represent more than one in five new cars (20.6%) – the largest monthly share of BEVs this year. Conversely, plug-in hybrid (PHEVs) registrations fell by -5.7%, making up 7.1% of the market. As a result, some 39,558 new plug-ins were registered, representing more than one in four (27.7%) new cars joining UK roads in November. Hybrid electric vehicles (HEVs), meanwhile, rose by 66.9% to 11.2% of the market, driven particularly by fleet operators looking for flexibility and emissions reductions.

The most in-demand supermini and lower medium vehicle segments both grew by 21.5% and 20.5% respectively in November, while dual purpose vehicles increased by 21.8%. There was significant growth in luxury saloon and multi-purpose vehicles, up 87.3% and 288.6%, but these segments still remain a small section of the market.

As growth returns to the new car market, the car sector is poised to deliver an additional £8 billion for the UK economy in 2023, with an anticipated 15.4% market growth.2 UK Automotive is making rapid strides to deliver on its net zero targets, and further acceleration requires forward-thinking planning and collaboration from all stakeholders. Measures that boost motorists’ confidence in EVs, including a fiscal framework that encourages EV adoption and targets to speed up the provision of charging infrastructure, will help to ensure uptake is in line with the UK’s green goals, particularly as the ambitious Zero Emission Vehicle Mandate comes into effect.

Mike Hawes, SMMT Chief Executive, said: “Recovery for Britain’s new car market is back within our grasp, energised by electrified vehicles and the sector’s resilience in the face of supply and economic challenges. As the sector looks to ensure that growth is sustainable for the long term, urgent measures are required – not least a fair approach to driving EV adoption that recognises these vehicles remain more expensive, and measures to compel investment in a charging network that is built ahead of need. By doing so we can encourage consumer appetite across the country and accelerate the UK’s journey to net zero.”

Jon Lawes, Managing Director, Novuna Vehicle Solutions: “It is encouraging to see that the new car market is still expanding, with battery electric vehicles (BEVs) capturing their largest monthly share of the new car market in 2022 last month.

“However, supply chain issues are now one of the most significant barriers to EV adoption. We’re seeing fewer than half the number of cars rolling off production lines than we did 5 years ago, owing primarily to ongoing issues obtaining computer chips for vehicles, which could severely dampen EV adoption in the coming months.

“While companies such as ours have taken steps to meet demand, such as purchasing vehicles up to 15 months in advance to ensure customers can get into new vehicles as soon as possible and extending lease agreements for those willing to wait, it’s clear that this isn’t the solution. To reduce these vulnerabilities and provide confidence to the sector, the government should consider developing a robust semiconductor industry in the UK.”

Meryem Brassington, electrification propositions lead at Lex Autolease said: “It has been a stellar year for the electric vehicle market, setting a new record for the pace at which people are making the transition to electric. The 29,372 EVs registered in November represent a 20.6% share of the new car market – another feather in the electrification cap as we continue along the Road to Zero.

“November also brought clarity from Government on company car tax rates beyond 2025, giving fleets the long-awaited certainty they need to commit to an electric future. However, with the introduction of VED for EVs, it’s important that the tax system continues to operate in a fair, emissions-based way if we are going to continue to clean up the older and more polluting vehicles on the UK’s roads.”

Kim Royds, EV Director at British Gas, said: “Despite ongoing supply chain challenges, the accelerated growth of electric vehicles continues to dominate the new car market – reaffirming the appetite among drivers to transition away from traditional petrol or diesel vehicles.

“However, there is still a great deal of work to be done to futureproof the UK’s charging network to meet the increased demand and ensure all motorists have access to reliable and convenient charge points. Providing compelling and easy options for home charging is a vital part of this and will help to stimulate further growth across the EV market.”

Jamie Hamilton, automotive partner and head of electric vehicles at Deloitte, said: “New car registrations grew in November by 24% compared to the same period last year. Against a relatively small base, fleet sales saw a significant uptick in fortunes of 45%, whilst private sales saw more modest growth of 3% as consumers shied away from making major purchases.

The industry looks to fleet sales

“As the rising cost-of-living continues to squeeze consumer pockets, the short term prospects for the automotive sector rely heavily on the performance of fleet sales.

“With many fleet managers currently under pressure to manage a wholesale transition to electric, there will have been relief that the Autumn Statement signalled a continued commitment to encouraging EV adoption through company car schemes.

“Benefit in kind (BIK) rates for EVs will rise from the current rate of 2%, going up 1% per year from April 2025 to 5% by the 2027/28 tax year. Signposting the road ahead for BIK rates should give fleet managers renewed confidence to forge ahead with the transition to electric. However, with supply still struggling to keep up with demand, it might be a while before we see this translate into a significant increase in sales.

One in five vehicles sold now electric

“Demand for electric vehicles continues to remain strong, with volumes up 35% compared to November 2021, and reaching a market share of 21%. These figures reflect a market with greater selection of vehicles and improved battery range, and also mark growing consumer confidence in charging infrastructure – albeit there is still a long way to go. However, with fuel prices also remaining high, this will undoubtedly be a key consideration for those consumers considering a switch.

“Consumers hoping to buy an EV will now also have to weigh up the additional Vehicle Excise Duty (VED) cost imposed in the Autumn Statement. From April 2025, owners of EVs will begin paying VED in the same way as traditional combustion engine vehicles owners do. The impact for cars costing below £40,000 should not be too material, at an extra £165 per year. However, the majority of EVs are currently priced at over the £40,000 price point, which means they will be liable for both £165 VED plus the £355 expensive car supplement – resulting in an additional cost of £520 per annum. A not insignificant sum given the current economic climate.”

John Evison, Associate Partner, OC&C Strategy Consultants, said: “More drivers than ever before will be driving home for Christmas in an EV car this year, with rising EV registrations a green shoot of optimism for the automotive sector amidst the gloom of an impending recession.

“High consumer demand for greener vehicles is a significant opportunity for the industry if it can capitalise on these shifting needs of the driver. The car is still king in the UK, with drivers set to accrue more miles this year than before the pandemic, so it is important that as many of these miles are made in an EV car as possible if we are to continue on our path to a net zero future.

“It is likely consumers will be facing difficult financial environment for some months to come, so it is important the industry does not rest on its laurels and continues to remove as many barriers to purchase as possible for EV cars. This could include offering low monthly payments across a span of 12 to 18 months to provide affordable leasing options.”

In a survey of 9,000 drivers across 8 different countries, the most recent Speedometer report by OC&C Strategy Consultants found:

  • 83% of UK consumers still view their car as essential
  • UK drivers are set to accrue more mileage this year than before the pandemic
  • 57% of drivers now expect to own an EV at some point in the future
  • 44% of UK drivers think that the pandemic made a car more essential

Karen Johnson, Head of Retail & Wholesale at Barclays Corporate Banking, said: “Electric vehicles have been something of a success story for motor dealers over recent months, as they provided a motivation for consumers to ‘buy new’ even in the face of growing demand for ‘used’, and November has seen sales of pure electric vehicle continue this positive trend.

“However, dealers across the market have concerns for the future with many reporting growing consternation amongst consumers. Reduced incentives, increased electricity costs and concerns about infrastructure are all contributing to a milder appetite for electric vehicles, with some previously confirmed orders even being cancelled in recent weeks. There is still clear demand for greener options, but going forward consumers look more likely to hedge their bets and buy hybrids. How long this lasts will be a key question for 2023.”

1 November 2019: 156,621 units.
2 Based on SMMT Market Outlook (October 2022) and Jato vehicle pricing data.

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