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A cloudy start but there is optimism for the new car market

Demand remained depressed for both private buyers (38.5%) and large fleets (39.7%). Declines were also recorded in both petrol and diesel cars registrations, which fell by -62.1% and -50.6% respectively. However, battery electric vehicle (BEV) uptake grew by 2,206 units (54.4%) to take 6.9% of the market.
Januarycarsales2021andYTD 1
Source: SMMT

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February 4, 2021

THE numbers might not look good but there is reason for optimism following the release of January new car sales figures which reveal the worst start to the year since 1970.

Leasing Brokers are reporting a lot of interest, particularly from fleets which held off renewals last year while an easing of lockdown should kick-start the market from the Spring.

The UK new car market fell -39.5% in January with 59,030 fewer registrations compared to the same month last year with just 90,249 cars registered as showrooms across the country.

Demand remained depressed for both private buyers (38.5%) and large fleets (39.7%). Declines were also recorded in both petrol and diesel cars registrations, which fell by -62.1% and -50.6% respectively.

However, battery electric vehicle (BEV) uptake grew by 2,206 units (54.4%) to take 6.9% of the market, as the number of available models almost doubled from 22 in January 2019 to 40 this year. Combined, BEVs and plug-in hybrid vehicles (PHEVs) accounted for 13.7% of registrations.

The effect of the current lockdown can be seen in SMMT’s latest market outlook. Having expected more than two million new cars to be registered in 2021, this forecast has now been downgraded to below 1.9 million.

This does represent an increase of 15.7% compared to 2020’s ‘lost year’ but it would still be a very subdued market in historical terms, given the 10-year average new car market to 2019 was 2.3 million. However, BEVs and PHEVs are estimated to grow their combined market share from just over one in 10 new cars, to more than one in seven.

Michael Woodward, UK automotive lead at Deloitte, said that while there is considerable uncertainty within the industry, early indications point towards a recovery in the second half of the year once lockdown restrictions have eased.

“The extension of some major government and private sector income-support measures, such as the furlough scheme and payment holidays on loans, mortgages and credit cards, has boosted consumer confidence in personal finances.

“Increased personal savings, as a result of fewer opportunities to spend, also point to favourable conditions for renewed consumer activity which could unleash pent-up demand.

“Year-on-year sales results are typically a marker of performance but, with sales at record lows throughout 2020, growth is inevitable. Understanding the context of this will be key to gauging the health of the industry in 2021.”

He added that EVs are becoming an increasingly viable option for consumers, many of whom are influenced by financial incentives as well as climate and emissions concerns.

He added: “For EVs to integrate further into everyday life, greater accessibility to charging points is still required. Ensuring a joined-up approach and continued investment in the infrastructure is key to support growing demand.”

David Borland, Ernst and Young UK and Ireland Automotive Leader said it is also worth keeping in perspective that January 2020 performance was not impacted by the pandemic, but sales were still down by 7% on 2019. So, based on a biennial comparison, today’s figures are 44% down on 2019.

He added: “But this is not just a UK issue – a truly global industry faces, in the main, similar challenges. We have seen similar declines in the EU, with Spain being one of the most challenging markets with a 51% reduction from 2020.

Borland said the continued rise and popularity of EVs is the silver lining for the industry, with positive sales helping the UK achieve its net zero targets.

“It’s clear we are seeing significant shifts in the direction of travel for consumers towards electric vehicles.”

Lucy Simpson, Head of EV Enablement at Centrica Business Solutions, said: “With growing attention on the Government’s Road to Zero strategy and its commitment to ‘build back greener’ from coronavirus, financial incentives that encourage EV adoption and support the creation of better charging infrastructure must be among the priorities for the Budget on  March 3.

“While the latest round of government funding for on-street charging points is welcomed, we must continue to accelerate the rollout to meet demand when the sale of new petrol and diesel fuelled vehicles is banned in 2030.

“It’s important that this is done fairly to ensure the appropriate distribution of public charging infrastructure, our latest research showed that many local authorities are lagging behind and have no plans to improve their existing networks.

“Not only will mass adoption of EVs support the UK’s carbon goals and provide a boost to the green economy through job creation, it can also unlock direct financial benefits for businesses that use the latest energy technology to monetise their EV charging facilities and trade with the grid.”

 

 

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Chris Wright

Chris Wright

Chris Wright has been covering the automotive industry nationally and internationally for 30 years. Following spells with consumer titles he became News Editor of Automotive Management (AM), Editor of Automotive International, International Editor for Detroit-based Automotive News, and Editor of Dealer Update. He has also co-authored several FT Management Reports and contributes regularly to Justauto.com

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