NEW car sales in February grew by 15% compared with February 2021, when sales were dented by showroom closures as a result of COVID-19 restrictions according to the latest figures from the Society of Motor Manufacturers and Traders.
Whilst this means a year-on year comparison does not reflect the true performance of the sector, sales also remain well below pre-pandemic averages in what is traditionally a weak month for new vehicle purchases.
Jamie Hamilton, Automotive Director and Head of Electric Vehicles at Deloitte, said: “Despite the current cost of living squeeze, consumer demand does not appear to be showing significant let-up. However, with new car sales hampered by a shortage of semi-conductors – compromising both inventories and order fulfilment – the used car market is booming. The average cost of a second hand vehicle is now reported to be more than £20,000, with some ‘nearly new’ stock selling for more than its brand new price as dealers attempt to keep up with demand.
“Manufacturers and dealers will barely have time to reflect on February’s performance as all eyes turn to March. The release of a new plate means that March is, traditionally, the most important month for new car sales and can account for as many as one in five annual registrations. However, the ability for manufacturers to fulfil ’22 plate orders will likely be compromised by the ongoing semi-conductor shortage.
“The EV sector continued to break new ground in February. Battery electric (BEV) and plug-in hybrid electric (PHEV) vehicles grew by 196% and 49% respectively in February, and now hold a combined 25% share of the market. This compares to 13% in the same period last year.
“There is no sign of EV sales slowing down and, with both petrol and diesel tipping past £1.50 per litre in recent weeks, some consumers will likely be considering the savings they could be making by switching to electric sooner rather than later.”
Manu Varghese, from EY’s UK & Ireland Advanced Manufacturing & Mobility Team, said that supply chain impacts and the chip shortage will continue in the short term to frustrate the industry. “We are in 2021 results season, with many auto manufacturers attributing falling production numbers (UK car production fell 20% in January this year) and high levels of unfulfilled customer orders to the shortage in semi-conductors.
“Despite that, February saw assertive statements from OEMs and automotive suppliers regarding an easing of the crisis. Through a combination of vertical integration and partnerships they have begun to see light at the end of tunnel and manufacturers are expecting a ramp up in production during the second half of 2022.
“Added to this, ongoing geopolitical uncertainties are likely to have an impact on the sector’s manufacturers, supply base, distribution and retail.
“Although March has traditionally been a key month for automotive sales, March 2022 is expected to follow a similar pattern to the last 18 months. Geopolitical uncertainties, inflation and rising fuel prices are expected to result in a poorer performing month compared to pre pandemic times. However, from a long-term perspective, February had a number of positives for the sector. The
“UK government announced an end to all Covid restrictions which is very positive news if you are in the business of selling products and services that enable personal mobility. There are tangible signs that the crisis related to the semi-conductor shortage is easing. Also, earnings announcements showed many OEMs and dealers continued to record profits despite the disruption.
“On the EV front, registrations in the UK for cars that run on clean energy continued to surge ahead. And in a positive step for the UK, a Swedish electric car manufacturer announced plans in February to open a new research facility in the Midlands, which is expected to eventually employ more than 800 people. All of the above point to a positive second half for the sector.”
Meryem Brassington, electrification propositions lead at Lex Autolease said that after a record-breaking year for zero-emission vehicles, there appears to be no signs of the market slowing down, with EVs now accounting for 15.5% of all new motors bought in the UK. Coupled with several manufacturers planning the release of new electrified models this year, the outlook for EVs looks exceptionally bright.
She added: “Despite the ongoing turbulence across the industry continuing to impact the supply of new vehicles, tentative green shoots of recovery are starting to appear within the supply chain and it’s possible that we will see some of the pent-up demand released in the months ahead.
“Yet, if we don’t see continued investment in the roll out of publicly available charge points then ultimately the UK won’t be able to meet the demand for an electrified future. All eyes will be on the Chancellor this month for clarity and additional incentives for both fleets and private drivers to accelerate the electric revolution.”
