7 Dec 16

UK new-car market to fall 3.5% in 2017

Motorway in the UK

The UK new-car market will drop 3.5% next year compared to this one, but that is no reason for negativity. In fact, at projected sales of 2.6 million units, 2017 will be the second-best year of the decade – after the current one. So says automotive data and valuation specialist Glass's, which finds that the UK's new and used car industries are doing remarkably well, all things considered.

Discussing the global uncertainty caused by Brexit and Trump, Rupert Pontin, Head of Valuations at Glass's, takes the glass-half-full approach: “Change can be a good thing and democracy often brings results that were deemed unfeasible at a given point in time and the outcomes can be surprising”.

And it has indeed been a pleasant surprise that the UK economy is proving so resilient, considering the doom scenarios suggested by opponents of Brexit. The car market in particular is doing quite well, with new registrations in the first ten months of the year up 2.1% over the same period last year for petrol cars (to 1.14 million), up 1.6% for diesels (to 1.11 million) and up 23.3% for alternative-fuel vehicles (to just under 80,000 units).

“This represents a 2.5% uplift on 2015 and the final figure looks set to beat most market pundit’s expectations at around 2.3% which will mean that 2016 will be another record-breaking year”, says Pontin. With private sales declining for most of the year, the bulk of the uplift in this year was generated by business fleets.  

However positive a spin anyone puts on the projections for next year, the fundamental projection is undeniably negative: a rise in inflation and a weak exchange rate are bound to eat into consumer confidence, which will lead to delays in purchases of big-ticket items such as cars.

The expected drop in new-car registrations is unlikely to worry manufacturers, who will repurpose part of their production for the as yet still growing European new-car market. That means less need for them to use discounts to force-feed the remainder to the British market.  

And that is good news for the UK used-car market, which is seeing volumes increase – up by 1.9% for the first ten months of the year, compared to the same period last year. That is an increase to such a degree that Residual Values are falling, especially due to the large number of vehicles being defleeted. Older used cars, on the other hand, have been slowly improving in value in recent years.

Image: Roy Hughes, CC BY-SA 2.0

Authored by: Frank Jacobs