For the first time in over three-and-a-half years, October saw year-on-year new car sales decline. Obviously the market is much bigger today than it was in February 2012 – the last time we saw a drop. Back then, just over 60,000 cars were sold. In February 2015 that number was just shy of 77,000. What’s more, by the end of October 2015, 2,274,550 cars had been sold – more than any year since the crash, bar 2014.
Clearly, then, this isn’t necessarily the beginning of the end of society or anything. There have been signs that the market has been slowing down for a while. Although private sales jumped in September, there have been multiple instances of private sales falling slightly in 2015. In these cases, fleet sales compensated for this, meaning the total number increased. In October, however, fleet sales only grew by 2.2% year-on-year, meaning no such balancing out could occur.
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Companies such as CAP, as well as the SMMT, remain relatively calm about the situation, viewing this as the market levelling off.
The national media had an alternative theory as to what caused the slump. When the figures were released earlier in November, the BBC ran with the headline: "Volkswagen’s UK sales fell in October, says SMMT", the Daily Mail ran with: "Post-scandal Volkswagen sales show fall but other manufacturers also see slump", while The Guardian wrote: "VW’s sales fall nearly 10% in UK, but other car brands also slide".
Clearly mentioning Volkswagen’s name was going to generate more views, but the link these papers are attempting to make between the emissions scandal which broke in September and the fall in new car sales is fairly clear, even if indirectly stated.
The numbers do not necessarily bear this out, however. While it’s true that VW sales fell in the month, so did the sales of Fords and Vauxhalls, which have remained relatively untainted by the scandal. Indeed, Vauxhall sales fell notably faster than its German counterpart’s.
Instead, the main takeaway seems to have been the other German prestige manufacturers growing. This was especially true of BMW, which grew sales by over 30% year-on-year – to sell just 32 units fewer than VW for the month. Mercedes also achieved double-digit growth in a shrinking market, while even Audi (which belongs to VW) achieved some growth (albeit of just 2.2%).
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By GlobalDataThe same was true at EU level, where VW sales shrank slightly (0.4%) in a market which grew by 2.9%, and other German manufacturers achieved various levels of growth. Both Mercedes and BMW achieved double-digit growth.
Clearly, then, the emissions scandal hasn’t caused VW sales to plummet, or the German ‘brand’ to falter too badly, at least in the immediate to short term. Beyond that, we can’t possibly know at the time of writing.
What we do know is that an unbroken period of unprecedented growth is now over. While there’s the possibility that this was a blip, and the market could return to the high growth levels seen in 2013-4 and parts of 2015, it would seem prudent for businesses at least to plan for what happens if this is the start of a period of slower, more stable growth.
The past few years have seen a number of players enter, or re-enter, the market. In many cases businesses were acquired by larger investors from outside the industry, attracted by good returns and the potential for reasonably good growth. What will they do if the market slows down? If growth slows to an anaemic pace, or stops altogether, and the only way to achieve growth is to increase market share, how will companies look to achieve this? We’re already seeing digital innovations in the point of sale finance space as a result of regulation and changing consumer habits. Could a slowing market speed up the pace of digital innovations?
Of course, at this point I’m just future gazing – as stated, we don’t know what’s going to happen to car sales, or what car manufacturers are going to do. This time next year Google and Apple may have released self-driving cars, the price of oil may have plummeted further, or any number of things could have happened either to disrupt or strengthen the market.
Jonathan Minter
jonathan.minter@uk.timetric.com
