New car registrations slows as shortages suppress growth

July’s new car registrations fell by -29.5% to 123,296 units, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT). The decline was artificially heightened by comparison with the same month last year, when registrations rose dramatically as showrooms enjoyed a full month’s operation following the first 2020 lockdown.

New car registrations

However, the July performance was down -22.3% on the average recorded over the past decade, as the ongoing semiconductor shortage and the ‘pingdemic’ impacted on both supply and demand.1 As a result, this was the weakest July for new car registrations since 19982, prior to the introduction of the two-plate system.

The decline was predominantly within large fleets which, at 61,140 units, was some -28.7% lower than the average recorded over the past decade.3 Private registrations declined by a lesser extent, -10.7%, to 59,841 units.

The bumper growth in plug-in vehicles continued, however, with battery electric vehicles (BEVs) accounting for 9.0% of registrations, while plug-in hybrids (PHEVs) reached 8.0%. All new car segments experienced declines, but Britain’s most popular types of cars remained superminis (32.9% of registrations), lower medium (28.0%) and dual purpose (27.3%).

While the UK’s economic outlook continues to strengthen, with most consumer indicators suggesting a greater appetite for spending, including on so-called ‘big ticket’ items, supply challenges continue to throttle growth with the weaker market conditions expected to continue in August – traditionally a quiet month for registrations – before modest growth returns in Q4.

As a result, the latest SMMT outlook has been revised downward and now forecasts registrations to reach around 1.82 million units in 2021. This is still some 11.7% up on 2020, but down from the 1.86 million forecast in April, and down around -21.8% on the average new car market recorded over the past decade.5 More positively, however, given the continued strengthening of the electric vehicle market, SMMT now estimates that BEVs will account for 9.5% of registrations by year end, while PHEVs are forecast to comprise 6.5% of the market, collectively totalling around 290,000 units by the end of the year.

Mike Hawes, SMMT Chief Executive, said: “The automotive sector continues to battle against shortages of semiconductors and staff, which is throttling our ability to translate a strengthening economic outlook into a full recovery. The next few weeks will see changes to self-isolation policies which will hopefully help those companies across the industry dealing with staff absences, but the semiconductor shortage is likely to remain an issue until at least the rest of the year. As a result, we have downgraded the market outlook slightly for 2021. The bright spot, however, remains the increasing demand for electrified vehicles as consumers respond in ever greater numbers to these new technologies, driven by increased product choice, fiscal and financial incentives and an enjoyable driving experience.”

Jamie Hamilton, automotive director and head of electric vehicles at Deloitte, said: “New car sales in July have stayed below pre-pandemic levels for another disappointing month in a row, falling -29.5% year-on-year. Whilst consumer demand remains high, the industry continues to face significant supply chain headwinds, along with staff shortages, stuttering overall production.

“With one in ten consumers looking to buy a car in the next three months, increasing supply in the market is likely to determine the speed of recovery.

“Such is the scarcity of new stock, combined with an ongoing global shortage of semiconductors, manufacturers are having to adapt what they deliver to clients; with some offering to retrofit chips when supply allows, in return for discounted or complimentary repair or annual services.

“As supply across the market remains short, the used car market continues to defy the norm with resell values remaining strong. For those consumer households looking to sell, perhaps due to multiple vehicle ownership, now is likely to achieve a very competitive price.

“The market share of battery electric (9%) and plug-in-hybrid (8%) vehicles grew their combined market share to 17% in July, gaining a further lead on pure diesel (7.1%). For this growth to continue, consumers will be looking for tangible improvements to the UK’s charging infrastructure in the run up to 2030. For now, there are still a number of incentives, including significant tax savings, that consumers can take advantage of when switching to electric. Raising awareness of these benefits and making them easy for consumers to navigate is key for further EV uptake.”

Neil Atherton, Sales and Marketing Director, Autoglass® commented: “With the semiconductor shortage disrupting the new car market and new car registrations falling, it is likely that more buyers will turn to the used car market to find their new vehicles. Used cars can be an affordable and sensible option for drivers looking for a different vehicle, but it is essential that sellers and buyers discuss all the advanced safety features in the vehicle to ensure the new driver knows how to maintain the technology and that it is functioning as intended.

“Advanced driver-assistance systems (ADAS) are increasingly prevalent in the UK car market to the extent that most used cars now have some form of ADAS technology onboard. The sensors and cameras for these systems need to be recalibrated after any accident or windscreen replacement to ensure they are able to correctly identify hazards on the road.

“Our research found that 24% of UK drivers were not provided with any information about these advanced safety systems when buying their vehicle, so they may not be aware of the need to recalibrate the systems after a windscreen replacement. This is very dangerous as vehicles have no method of alerting drivers when the ADAS sensors are not recalibrated or not calibrated correctly. If a recalibration is not carried out at all or not carried out successfully then there is risk that the driver will be relying on a safety system which is not functioning as the manufacturer intended.”

Jon Lawes, Managing Director of Hitachi Capital Vehicle Solutions, commented: “The trajectory for EV uptake continues to be positive and these latest figures prove that barriers to entry are falling, whilst driver confidence is rising. Investment in infrastructure is crucial to accelerating the transition as quick as possible and the government spotlight on potential zero emission vehicle mandates, as well as the recent transport decarbonisation report, will only improve this further.  Supply chain is an increasing challenge, so it is integral that fleets remain agile to increase volumes in a sustainable manner.”

New car registrations

New car registrations

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