IMPROVING business confidence is driving new car sales with the year’s first full month of showroom openings showing registrations in May reaching 156,737 units, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).
This represents an almost eightfold increase on the same month last year, but is down 14.7% on pre-pandemic May 2019, and 13.2% down on the 10-year May average.
Uptake was in line with the most recent industry outlook, published in April, which sees the sector anticipating around 1.86 million registrations by the end of the year – with 723,845 achieved so far.
Against a more positive economic backdrop – including OECD forecasting a 7.2% increase in UK GDP during 2021 – fleet registrations grew more than twice as fast as private purchases in May.
Large fleets accounted for 50.7% of all new vehicles hitting the road, demonstrating improving business confidence compared to the same month last year.
In terms of segments, dual purpose vehicles saw a small decline in market share in the month, down to 26.7%, leapfrogged by lower medium cars which rose to 27.8%. Superminis remained Britain’s most popular car choice, with a 31.1% share.
Battery electric vehicle (BEV) market share declined from 12.0% a year ago to 8.4% in the past month, although the May 2020 performance was distorted by lockdowns when new cars could only be purchased through click and collect or delivery, giving rise to variable purchasing patterns.
Looking more broadly across 2021, plug-in vehicles now comprise 13.8% of new car registrations, up from 7.2% a year earlier, with the most rapid growth seen in plug-in hybrid (PHEV) derivatives. Pure petrol and mild hybrid petrol cars so far account for 60.4% of registrations, while pure diesel and mild hybrid diesels took a 18.0% share year to date, compared to 64.6% and 22.4% last year.
Meanwhile, total registrations for 2021 sit at 296,448 fewer units, or 29.1% less, than the average recorded across January to May during the last decade, evidence of the scale of the recovery still needed given the impact of Covid on the market.
Mike Hawes, SMMT Chief Executive, said: “With dealerships back open and a brighter, sunnier, economic outlook, May’s registrations are as good as could reasonably be expected.
“Increased business confidence is driving the recovery, something that needs to be maintained and translated in private consumer demand as the economy emerges from pandemic support measures.
“Demand for electrified vehicles is helping encourage people into showrooms, but for these technologies to surpass their fossil-fuelled equivalents, a long term strategy for market transition and infrastructure investment is required.”
Andrew Hurdle, Head of EV at British Gas Business, said the figures reaffirm that zero-emission vehicles are fast becoming the top choice for businesses and individuals, but there remains a great deal of work to do to get the UK ready for the 2030 ban on new ICE vehicle sales.
He added: “Our latest research found that businesses are set to invest £16 billion in EVs over the next 12 months and, while this planned investment is encouraging, some significant barriers to widespread adoption remain, including a lack of public charging infrastructure across large parts of the country.
“It’s crucial that we continue to accelerate the roll out of charge points across the UK, both on streets, in homes and at businesses. It’s equally vital that we ensure that these systems are smart and flexible to minimise the amount of upgrading works necessary to manage growing demand. The £300m charging infrastructure boost from Ofgem will be welcomed by many, but much higher levels of investment will be needed to accelerate EV adoption as the 2030 deadline approaches.”
Easing of restrictions
James Fairclough, Chief Executive of AA cars said that with lockdown restrictions set to be eased even further in late June, many prospective buyers will be keen to choose a vehicle that will enable them to enjoy a summer staycation in the UK, or just to travel to see family and friends across the country.
He added: “But there are other reasons why dealerships are so busy. AA Cars data shows that drivers’ main reason for buying a new car this year is to own a more environmentally friendly vehicle.
“Accordingly, fully electric vehicles now account for more than 7.5% of all new car sales in 2021, and we fully expect their market share to rise even further in the second half of the year.
“It may take some time for sales of new cars to return to their pre-pandemic levels, as many drivers continue to be drawn primarily to the used market, which offers affordable price points and plenty of choice.
“We have also seen drivers increasingly choosing to lease rather than buy, particularly those who want to try an EV for the first time without the commitment of owning outright.”
Cloud on the horizon
Sue Robinson of the National Franchised Dealer Association Sue Robinson said footfall levels and volumes of enquiries alike are now beginning to increase following the reopening of dealerships.
She added: ““The outlook for the industry remains positive, consumer confidence is rising and with the economy performing better than expected, dealers are optimistic about the months ahead although tightness in supply may affect registrations of new cars over the summer”.
Much now depends on any further easing of lockdown although another cloud on the horizon is the ongoing global shortage of semi-conductors and disruption is expected to last at least through to the end of the year.
Manufacturers have responded so far by employing a variety of tactics to minimise both near- and long-term damage. This includes shifting assembly to more in-demand products, bypassing the installation of some parts and modules until a later date, and securing alternate sources of semi-conductor supply.