Brexit raised its ugly head again this week as the Society of Motor Manufacturers and Traders (SMMT) reported a fourth consecutive month of decline for new car sales in the UK – bringing an end to five years of growth across the automotive industry, including a record 2.6m registrations in 2016.
Recent figures published by the SMMT found that sales fell 9.3% in July to 161,997 new cars as Brexit uncertainty causes a reluctance amongst consumers and businesses to commit to major spending decisions. These latest results have caused the SMMT to urge the government to act quickly and provide concrete plans regarding Brexit.
Sales of diesel cars were down by a fifth in July compared with a year earlier to 69,157. Sales of petrol cars which were also down in July, falling 3% to 83,969. A lot of the blame is being pointed at the government’s new air quality plan, which proposes to end the sale of all conventional petrol and diesel cars by 2040. Hybrid cars, which combine a petrol or diesel engine with an electric motor, will still be permitted and in contrast to the above results July saw a sharp rise in the sale of new alternatively fuelled vehicles, up 65% compared with the same month last year to 8,871 – a record high.
This announcement gives the automotive industry a clear indication of where the VMs and government are in relation to the supply and sale of petrol and diesel vehicles.
The combination of Brexit uncertainty and ‘Diesel D-day’ (as it is being referred to), is causing experts in the industry to forecast a sharp downturn in performance with sales continuing to potentially fall by 10-20% a month in the near term. Consumer confidence fell in July to a level not seen since the same month last year when sentiment dropped in the wake of Britain’s unexpected vote to leave the EU. It is feared consumer and business confidence will take a further hit as the Bank of England is expected to raise interest rates in the near future after inflation surged past the Bank’s target of two per cent, meaning household budgets will come under increased pressure from rising living costs.
There are now fresh fears that declining demand for new cars and a slowdown in investment, caused by Brexit-related uncertainty, means the car industry will miss its target of producing 2 million vehicles a year by 2020. The hit to consumer sentiment from June’s national election – in which Prime Minister Theresa May lost her parliamentary majority – could push registrations down further as sales tend to lag six months behind consumer confidence.
Although, a fall in demand for new cars this year had been widely expected especially after a period of consistent and rapid growth, these latest figures suggest that the political climate is having a significant influence on the direction the industry is heading in. The sooner we get some form of clarity as to what a post Brexit Britain will look like, the better!
In stark contrast, the used car market has seen a year on year sales increase of 39% according to research carried out by enquiryMax, the lead management specialist. Its research of data from 500 dealerships across the UK also found a 43% rise in enquiries and 60% rise in test drives. Online activity also saw a boost with leads from digital channels increasing by 104% – a stark reminder of just how important a role the internet is playing as a primary resource for leads.
Do these latest figures suggest a clear change of direction in the market with dealers putting more focus and resource into used car sales? Only time will tell so watch this space.