Supply shortages shackle new car market performance

UK new car registrations fell -24.3% in June, according to the latest figures released today by the Society of Motor Manufacturers and Traders (SMMT). The month saw 140,958 new vehicles registered, the weakest June performance since 1996.

Battery electric vehicles (BEVs) continued their growth streak, however, with a 14.6% increase in volume, as market share continued to grow, reaching 16.1%, up from 10.7% a year before. Conversely, plug-in hybrid vehicle (PHEV) uptake fell by 4,425 units to take a 5.5% market share.  In total, plug-in vehicles comprised more than a fifth (21.6%) of new cars joining the road in the month. All other powertrains saw declines in registration volumes and market share apart from hybrid electric vehicles (HEVs), which, despite a 1,172 unit fall, increased their market share to 10.6%.

Declines were most significant in large fleets, which recorded a -27.6% fall in registrations, while private consumer volumes dropped by a more modest -21.7%. As a result, the fleet and business share of the market reduced to 50.7% as manufacturers prioritised private consumers in the supply-constrained environment.

Given the ongoing shortages of essential components, exacerbated by pandemic restrictions in China, global vehicle production has struggled to keep up with demand throughout 2022. New car registrations for the year to date have fallen by -11.9% to 802,079 units – the weakest first half year performance since 1992, bar 2020.1 Some 107,894 fewer new cars have been registered during the first half of 2022 compared with the same period last year – despite 2021 demand being restricted by dealership lockdowns until April, with consumers only able to buy vehicles through click and collect.

More positively, electric vehicle market share continues to grow. Plug-ins account for a record one in five new car registrations year to date, demonstrating manufacturers’ commitments to deliver the latest zero emission capable vehicles. The pace of this growth, however, is decelerating, with registrations up by 26.0% in the first half of 2022, compared with growth of 161.3% during the first half of 2021.2

While growth rates were expected to moderate as the market begins to establish, the slowdown is more than had been anticipated, leaving the market behind the industry’s outlook.3 Part of this fall is attributable to the continuing supply chain shortages that are hampering production of all models, but the scrappage of the plug-in car grant means the UK is now the only major European market without purchase incentives for private EV buyers.

Mike Hawes, SMMT Chief Executive, said, “The semiconductor shortage is stifling the new car market even more than last year’s lockdown. Electric vehicle demand continues to be the one bright spot, as more electric cars than ever take to the road, but while this growth is welcome it is not yet enough to offset weak overall volumes, which has huge implications for fleet renewal and our ability to meet overall carbon reduction targets. With motorists facing rising fuel costs, however, the switch to an electric car makes ever more sense and the industry is working hard to improve supply and prioritise deliveries of these new technologies given the savings they can afford drivers.”

Meryem Brassington, electrification propositions lead at Lex Autolease said: “Despite the ongoing material challenges troubling the new car market, electric vehicle uptake has continued to rocket, with today’s half-year figures representing a 56% increase on this time last year.

“In order to continue this momentum, we must guarantee that EVs are affordable for all through a stable second-hand market while ensuring the UK’s public charging infrastructure is robust enough to match the increased number of electric vehicles on the roads. The government’s decision to redirect investment away from the plug-in car grant towards accelerating the roll-out of charge points will go some way to help meet the demand, but we must continue to see further investment from policy makers.

“This includes a long-term visibility of company car rates beyond 2025 to give fleet decision makers the clarity they need to make purchasing decisions, especially with the longer lead times from manufacturers currently being experienced.”

Jon Lawes, Managing Director, Novuna Vehicle Solutions: “With EVs now making up around a third of all vehicle registrations, it’s really exciting to see demand continue, despite ongoing vehicle supply shortages.

“As eye watering prices at the pumps prevail, there has never been a better time to lease an EV, particularly via generous salary sacrifice schemes where we’re seeing a huge demand from customers seeking to help their employees join the EV revolution. Leasing not only offers a cost effective way to get into an EV, it also provides protection of fixed costs against the challenging backdrop of rising inflation.”

Jamie Hamilton, automotive partner and head of electric vehicles at Deloitte, said: “New car registrations in June fell by 24% compared to the same period last year, which were themselves down by -16% on the 10-year June average. A year-on-year decrease in both private (22%) and fleet (28%) sales also means that, at the halfway point in the year, sales are down by 12% compared to mid-year 2021. These figures represent the worst June sales since 1996 and the worst first half of the year since 1992.

“The main reason for a lacklustre June is the ongoing semi-conductor shortage, exacerbated by continued disruption globally to production. Built up demand means many dealers have their order books full for the rest of the year. However, with consumer confidence at an all-time low, real wages in decline, and record prices at the pumps, the economic headwinds are gathering. As a result, there will be some nervousness around the market in 2023.

Almost one in six cars sold is fully electric

“However, the continued growth of electric vehicles (EVs) offer a more optimistic outlook. Stung by record fuel prices, many consumers are thinking more seriously about moving to electric and the benefits of doing so. Battery electric vehicles managed to achieve 15% growth in June, meaning that almost one in six new cars sold in the UK last month were fully electric. This is despite continued supply constraints, applying the brakes on even stronger growth in June. With consumers no longer able to benefit from initial purchase subsidies, it is too soon to say how this might reflect on sales longer-term.

“As the market for electric vehicles continue to grow, attention must turn to the continued rollout of charging infrastructure, as well as the longer term view on production infrastructure in the UK. This will involve further investment in gigafactories and the associated supply chain to ensure the UK can remain competitive on the global stage.”

Henry Duff, Head of Net Zero at British Gas, said: “The accelerated growth of electric vehicles (EVs) continues to dominate the new car market, with more than 115,000 vehicles registered in the first half of the year – putting another feather in the UK’s electrification cap.

“The road ahead looks encouraging too. According to our latest research, UK businesses are set to adopt more than 160,000 EVs as part of a £13.6bn electrification drive in the next twelve months.

“As demand for EVs intensifies, we must ensure that the UK’s charging network is ready for drivers to access reliable, convenient and easy to operate charge points. The government’s decision to redirect investment away from the plug-in car grant towards advancing the rollout of charge points will go some way to help meet the demand for better infrastructure and give motorists the confidence to make the switch to electric.”

1 Jan-Jun 1992: 768,745; Jan-Jun 2020: 653,502

2 Jan-June 2021 BEV +PHEV registrations: 132,100 – Jan-Jun 2020: 50,564

3 SMMT Outlook published May 2022; next revision to be published in August 2022.

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