New car registrations in the UK rose for the first time this year, increasing by 11.3% year-on-year in July, according to the latest figures from the SMMT.
Some 174,887 cars were registered in July 2020 as UK dealerships opened for their first full month of trading since February. This represents a significant improvement on the same month last year, when declining business and consumer confidence undermined the market.
Pent-up demand and special offers led to a reprieve for the sector, but overall registrations are still down by 41.9% or 598,054 units year-to-date. Despite the increase in July, SMMT’s full year outlook is for a -30% decline in registrations, representing more than £20bn of lost sales.
Private demand saw the most significant growth with a 20.4% increase in registrations, primarily a result of consumers finally being able to renew their cars after lockdown had forced them to delay. In addition, manufacturer incentives have helped attract customers to showrooms. Eight of the 10 major manufacturers provided attractive finance offers and flexible payment terms in a bid to head off consumer uncertainty – vital as the Coronavirus Job Retention Scheme phases out, potentially sparking redundancies across the economy and impacting confidence to invest in big ticket purchases.
Public appetite for zero and ultra low emission cars remains stable, with plug-in hybrids and battery electric vehicles taking a 9.0% share of registrations for July, compared with 9.5% last month and up from 3.1% for 2019 overall. Meanwhile, ‘supermini’ and lower medium sized (or small family) cars were once again the most popular segments, accounting for 59.1% of registrations. Dual Purpose cars comprised 25.9% of vehicles registered.
Business car registrations showed modest growth, with fleet purchases increasing by 5.2%. Even so, more than 13,000 jobs have now been lost by UK Automotive across retail and manufacturing as a result of the pandemic, with more likely to follow given the scale of the challenges facing the sector, including shifts in technology, Brexit uncertainty and a depressed market.
Mike Hawes, chief executive of the SMMT, said: “July’s figures are positive, with a boost from demand pent up from earlier in the year and some attractive offers meaning there are some very good deals to be had. We must be cautious, however, as showrooms have only just fully reopened nationwide and there is still much uncertainty about the future.
“By the end of September we should have a clearer picture of whether or not this is a long-term trend. Although this month’s figures provide hope, the market remains fragile in the face of possible future spikes and localised lockdowns as well as, sadly, probable job losses across the economy. The next few weeks will be crucial in showing whether or not we are on the road to recovery.”
Seán Kemple, managing director at Close Brothers Motor Finance, commented: “We usually see a summer slump, but 2020 has been anything but normal; July’s sales have instead accelerated from June. Lots of activity on the showrooms is a sign of recovery as dealers work hard to give buyers the keys to their new car. People are continuing to turn away from public transport and look for alternative ways to travel, which is boosting the car market significantly.
“As the traditional commute changes shape, the sector will need to adapt to new norms around car ownership. And dealers and finance providers need to be braced for these changes. Coping with a sudden influx of demand will be a fresh test for many dealers who are stretching resources to manage sales. Collaboration across the industry along with vital support from the Government will bring the market to strength and help it to weather the storms that may lie ahead.”
Michael Woodward, UK automotive lead at Deloitte, said: “This flurry of post-lockdown activity hints towards a speedy recovery. However, manufacturers and dealers alike will treat these results with caution. The conversion of latent demand, built up over the last four months is a key driver of July’s growth, but we may see a slower rate of sale return over the course of the year once this demand dissipates.
“Whilst consumer confidence is returning, albeit slowly, consumers remain concerned over the state of the economy and the job market. As a result, consumers may be more cautious over major purchases moving forward. However, significant discounting is likely over the coming months as manufacturers bring their factories back up to full capacity. This could help maintain higher level of sales, at least in the short-term.”
James Fairclough, chief executive of AA Cars, said: “After months of falling sales, this uptick suggests two important trends in consumer attitudes. Firstly that there was pent-up demand during lockdown, and drivers are now acting on their desire or need for a new car.
“Secondly, it allays some fears that consumers would hold onto their cash and stay reluctant to spend, particularly on big ticket items such as cars. Electric vehicles, in particular, are powering this increase, with sales growing by 261% year on year in June, and now 259% in July.
“Meanwhile overall views of cars on the AA Cars site remain 113% higher than they were during the first week of lockdown, indicating that drivers still want or need to change their car, whether brand new or used.”
Karen Hilton, chief commercial officer at heycar, said: “As has been witnessed in every other part of life, the rapid increase in digital first activity has spread into car buying – and offers massive opportunities for dealers looking to continue this road to recovery.
“This adoption of a full online research and preparation phase for car buyers would never have accelerated so quickly had it not been for the pandemic. However, it’s behaviour that’s here to stay and dealers need to respond to grow their sales again.
“As we keep on waiting to see if the government will offer any assistance to the industry to build back, we must take matters into our own hands to continue these new ways of engaging customers and keep people buying cars.”
Sue Robinson, director of the NFDA, said: “It is positive that in addition to the encouraging trend in the used car market, new car sales have also returned to form. We must however continue to monitor the health of consumer demand to understand the support our sector may need over the coming months.
“It is encouraging to see continued growth in the battery electric vehicle sector which shows consumers have an appetite for these vehicles. August is traditionally a quiet month, however as commuters continue to look for alternatives to avoid public transport, automotive retailers can benefit from the increasing interest from consumers to buy a car.”