PENT-UP demand and special offers boosted the UK new car registrations which rose for the first time this year in July.
Figures published by the Society of Motor Manufacturers and Traders (SMMT) show a rise of 11.3% during the month to 174,887 as 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.
Overall registrations are still down by 41.9% or 598,054 units year-to-date and the SMMT’s full year outlook is for a 30% decline in registrations, representing more than £20 billion 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 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 as the Coronavirus Job Retention Scheme phases out.
This could potentially spark 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, SMMT Chief Executive, 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.”
Sue Robinson, Director of the National Franchised Dealers Association, 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”.
Michael Woodward, UK automotive lead, Deloitte, said the flurry of post-lockdown activity hints towards a speedy recovery although the results should be treated with caution.
He added: “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.
“Whilst the UK remains one of the only major economies not to have provided an auto stimulus package in response to COVID-19, there are already significant tax incentives in place for electric vehicles.
“These incentives seem to be working and, combined with greater consumer awareness on climate change, the EV market continues to grow rapidly, continuing a trend of triple digit growth that was only interrupted at the height of lockdown.”
Dealers saw double-digit growth in orders for new and used cars in July according to data from lead management experts at Dealerweb. Orders for new vehicles increased by 12% and used cars by 16% against July 2019.
Inquiries also increased with a 16.5% increase in the new sector and 27% rise in used. The performance shows how well dealers are adapting to selling under social distancing measures.
Managing Director James Hill, said: “July shows another strong performance by dealers across the UK. A significant rise in order take for new vehicles in both June and July will feed into increased registrations over the next quarter. While the performance of the used sector continues well above usual seasonal patterns.
“It is clear that dealers are pushing harder to meet pent up demand, but I also think we see additional growth from buyers who have made savings during lockdown and have money to spend. It is key for all dealers to manage leads in this volatile market carefully.”
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