New car registrations fall as supply issues continue to bite

Friday, August 5, 2022 - 07:44
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UK new car registrations fell by -9.0% to reach 112,162 units in July, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).1 The result marks the fifth month of consecutive decline, although the fall is the smallest recorded this year.2

Ongoing global supply chain issues, predominantly the lack of semiconductors, continued to frustrate order fulfilment, exacerbated by Covid lockdowns in key manufacturing and logistics centres in China, plus disruption from the war in Ukraine, all of which restricted production output and thus supply into the UK new car market.

Declines were driven primarily by a -18.2% fall in registrations by large fleets, to 50,014 units, while consumer registrations remained steady at 59,847 units. As a result, private registrations in the year to date are now 3.7% up on 2021 as manufacturers prioritise private customers.

Battery electric vehicle (BEV) uptake grew 9.9% to 12,243 units to achieve a 10.9% market share for the month. Although this is the weakest monthly uplift recorded by BEVs since the pandemic, overall growth in the year has reached 49.9% to deliver a 13.9% market share, illustrating the volatility in the supply chain. July was a weaker month for hybrid electric vehicle (HEV) uptake, with registrations falling -6.7% to take 12.2% of the market. Plug-in hybrids (PHEVs) fell -34.0% which cut their market share to 5.8%.

The first half of the year has proved more challenging than anticipated, due to the enduring severity and impact of the semiconductor shortage and global conflict. While the sector expects the second half to improve as supply issues start to recede, it is unlikely that the market will be able to recover the significant losses sustained so far. The outlook for the full year has therefore been revised downwards to 1.6 million new car registrations – a -2.8% fall on 2021, with the industry facing its most challenging year for three decades. Around two million registrations have been lost since Covid, effectively representing a loss of a year’s registrations. Plug-in market share will continue to grow, however, to reach 22.6% as manufacturers prioritise investment in zero emission vehicle production.

Likewise, although the 2023 outlook has also been revised downwards since the April estimate, it is likely to be an improvement on 2022, with overall registrations anticipated to reach to 1.89 million (rather than 2.02mn), with plug-ins comprising 27.8% of the market.

Mike Hawes, SMMT Chief Executive, said, “The automotive sector has had another tough month and is drawing on its fundamental resilience during a third consecutive challenging year as the squeeze on supply bedevils deliveries. While order books are strong, we need a healthy market to ensure the sector delivers the carbon savings government ambitions demand. The next Prime Minister must create the conditions for economic growth, restore consumer confidence and support the transition to zero emission mobility.”

Meryem Brassington, electrification propositions lead at Lex Autolease said: “Demand for electric vehicles continues to paint an encouraging picture for the UK’s electrification journey, with the 12,243 EVs registered in July representing a 10.9% share of the new car market.

“While this growth is welcome, ongoing material shortages and vehicle supply issues continue to affect the EV market and could put the brakes on the good progress already made, leading to significant implications for fleet renewal.

“Policymakers have played an important role in helping to drive the uptake of electric vehicles this year and all eyes will be on the government in the autumn for clarity on company car tax rates beyond 2025 – with the hope that any changes remain gradual and proportional.”

John Evison, Associate Partner, OC&C Strategy Consultants: “Today’s subdued new car registration figures are a result of the dual struggles facing the automotive industry. At a time when the sector is still grappling with supply chain challenges, the cost-of-living crisis is supressing short-term demand as consumers are delaying purchasing decisions. With semiconductors still in short supply and inflation continuing to rise, it is likely the new car market will remain sluggish for at least another 12 months.

“Electric vehicles (EVs) now comprise approximately 1 in 3 new registrations and the market remains relatively robust, more drivers looking for more sustainable alternatives despite the high upfront cost and potentially incremental cost of installing a home charger. Demand will remain strong as OEMs are likely to prioritise EV orders over petrol or diesel, primarily due to the higher margins and requirements to meet strict emissions targets.”

Jon Lawes, Managing Director, Novuna Vehicle Solutions: “Despite the automotive industry continuing to be stifled by supply shortages, today’s figures illustrate that demand for electric vehicles (EVs) remains strong, with EVs making up approximately one third of all vehicle registrations in July.

“What we need now is to see this demand matched by a more efficient use of existing public funds to deliver the EV charging  infrastructure that motorists need. Our research showed the stark contrast between the level of public spending that the UK’s nine Metro Mayors have invested in this area, installing just 42 public EV charging points last year. This is despite having access to a £250m annual budget and being responsible for some of the UK’s biggest city regions.”

Jamie Hamilton, automotive partner and head of electric vehicles at Deloitte, said: “New car registrations fell by -9% this month, marking the fifth consecutive month of decline. This has been driven by flat private sales and a decrease in the volume of fleet sales (-18%) as manufacturers have prioritised the former, and supply constraints have continued to drag on the market.

“At the same time, CFOs expect a recession within the next 12 months and are taking a more defensive balance sheet stance. As a result, fleet purchases are likely to have become less of a priority.

Deloitte Consumer Tracker: 5% of UK consumers intend to purchase a car in Q3

“Despite record low consumer confidence and the ongoing cost-of-living crisis, demand among some consumers wanting to purchase a new car has yet to dampen. Around 5% of UK consumers intend to purchase a car in Q3, which remains consistent with expected levels of demand.

“Dealers will take solace in the fact that pent-up demand and the current timeframe associated with buying a new car mean that many of them have been able to fill their order books for the remainder of this year.

“Attention is now turning to the sector’s prospects for 2023. With inflation expected to rise further, there is a very real risk that more consumers will find themselves unable to afford big-ticket purchases. Some may simply decide it is not the right time to buy a car – new or used. As a result, dealers will have to be even more savvy with their range of available vehicles. For example, adapting stock to cater to buyers looking for smaller, cheaper and more economical vehicles.

Record fuel prices drive more consumers towards electric

“Despite ongoing struggles experienced across the sector, battery electric vehicles continue to grow in popularity; up 50% in July compared to the same period last year and capturing 14% of the total new car market. However, at the same time sales of plug-in hybrids fell by 15%.

“This can be explained, in part, by some manufacturers prioritising the production of battery electric vehicles as semiconductor supplies remain constrained. Record fuel prices are also encouraging consumers to consider more seriously the switch to fully electric.

“Many new EVs remain substantially more expensive than their petrol or diesel comparable, and cost remains a major factor for consumers. The removal of financial incentives in other markets has supressed demand and many expect the same for EVs with the removal of plug-in vehicle grants. However, as well as being able to make major savings on fuel, maintenance costs for EVs are also relatively lower compared to combustion engine vehicles, as EVs have fewer moving parts and no need for regular oil and filter changes. In addition, there are substantial tax savings still available when purchasing an EV through a benefit-in-kind company car scheme.”

  1. July’s figures reflect a short interruption to registrations processing at one manufacturer due to a planned systems upgrade affecting a limited number of vehicles. This does not materially affect the overall market performance.
  2. June -24.3%; May -20.6%; April -15.8%; March -14.3%

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