9 oct 17

UK new car sales fall sharply

New car sales declined sharply in the UK in the key month of September, raising concerns about the state of the national economy, and posing a risk for Europe’s total sales in 2017.

UK sales of 426,170 units were down 9.3% in September, compared to the same month in 2016, the sixth consecutive month of decline, and the first time registrations have declined in September in six years. A twice yearly change in the date identifier on vehicle registration plates – in March and September – makes these peak months for new car sales in the UK.

Demand tumbled across the board, with fleet sales dropping by 10.1%, business sales (companies operating fewer than 25 vehicles) down by 5.2%, and private sales 8.8% lower in the month. For the year to date, the market currently stands 3.9% below the first nine months of 2016, and while it is unlikely to match the all-time record of 2016, more than 2 million vehicles have already been registered this year.

The Society of Motor Manufacturers and Traders (SMMT) blamed the faltering sales on a dip in consumer confidence due to economic and political uncertainty, as well as confusion over air quality plans. Negotiations over Brexit and the format of any future trade deals or tariffs with the rest of the European Union are dominating national headlines.

The most notable development in the September figures was the 21.7% fall in sales of diesel cars, the sixth consecutive month of decline. If the trend continues, the SMMT warns that the average CO2 emissions of new cars could rise this year, the first time this will have happened since emissions started being recorded in 2000. A 41% uplift in registrations of alternatively fuelled vehicles failed to compensate for the decline in diesel.

The decline in demand for diesel has continued into the used car market, where values have fallen by about 10% during the first nine months of 2017, two percentage points more than typical performance, while the petrol sector has improved throughout the year, according to Cap HPI.

Mike Hawes, SMMT chief executive, said, “September is always a barometer of the health of the UK new car market so this decline will cause considerable concern. Consumers should be reassured that all the new diesel and petrol models on the market will not face any bans or additional charges.”

Volkswagen was the notable winner in the UK last month, increasing its sales by 7.74%, and taking its market share to 8% for the year. It is now the UK’s second best-selling car brand, a remarkable change of affairs given the current consumer attitude to diesel and the manufacturer’s role in the emissions cheating scandal of 2015. The other mainstream manufacturers boosting their UK year-on-year sales in September were Infiniti (+59%), Seat (+14%), Alfa Romeo (+12%), Nissan (+4%), Kia (2%) and Toyota (+2%). Headlining the losers were Fiat (-42%), Ford (- 19%), Renault (-28%) and Vauxhall (-26%).

While the figures look dramatic, some commentators urged the industry to focus on the more modest 3.9% decline in year-to-date sales, and suggested that 2017’s registrations were a more realistic representation of the true market.

Anthony Keohane, director in the automotive and roadside division of Colliers International, said, “Last year, there was a push to register cars to meet targets so the high figures that were reported masked the true sales numbers. 2016 sales weren’t fully representative of the sector as they reflected a large number of pre-registered vehicles. A number of our clients have reviewed their strategies and it would appear that the dealers are now more focussed on profits and less about chasing the registration numbers.”

Some countries have yet to report new car sales figures for September, but across the EU sales have been buoyant, with the industry recording its best August since 2008.

And so far there has been positive news from markets where registration data for September is available; in France, sales were up 1.1% to 170,652 units, pushing the total for the first nine months of the year to 1,560,885 sales, an increase of 3.9%.

In Italy, registrations were up by 8.1% to 166,956 units, in September, compared to 2016, and sales for the year to date are currently running 9% ahead of 2016, at 1,533,710 units.

The Spanish market is also doing well, driven by business and rental sales. Business registrations were 8.1% up in September to 30,677 units, and sales for the year to this sector are now 13.7% ahead of the same period in 2016 at 271,634 units. Rental companies have acquired 8.9% more cars in the first nine months of 2017 than 2016, at 199,398 units, although sales to this sector were down 4.6% in September on the same month of 2016. Overall, sales in Spain were 4.6% up in September, at 83,291 units, and registrations for the first nine months of the year are 6.7% higher than the same period of 2016, at 933,142 units.

Across the continent, the sale of diesel continues to decline, however, with the European automotive manufacturers association (ACEA) reporting that the fuel’s market share in the EU-15 countries fell from 50.2% to 46.3% in the first half of this year, with sales of petrol models overtaking diesel sales for the first time since 2009. Auto makers warn that this shift to petrol engines with higher CO2 emissions will pose additional challenges for the industry to meet its future CO2 reduction targets. The manufacturers potentially face large fines if they miss CO2 targets in Europe by 2021.

Authored by: Jonathan Manning