Press release

5 Dec 2019 London, GB

New UK car sales suffer another year-on-year drop in November; private car sales particularly weak

A difficult year for new car sales looks to be ending 2019 with no real sign of moving into a faster lane – although the rate of year-on-year falls did at least decelerate in November.

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Related topics Automotive
  • A difficult year for new car sales looks to be ending 2019 with no real sign of moving into a faster lane – although the rate of year-on-year falls did at least decelerate in November. The car sector can also take some hope from strong demand for alternatively fuelled vehicles, which took a record 10.2% share of the market.
  • The hope for car manufacturers no doubt will be that the uncertainties surrounding the economy are diminished by a decisive General Election result and the UK leaving the EU with a “deal” on 31 January, and that this encourages businesses to step up their fleet purchases and makes consumers more willing to splash out on big-ticket items such as cars.  
  • New car sales fell 1.3% year-on-year in November, marking the eighth decline in the past nine months. Consequently new car sales were down 2.7% year-on-year over the first 11 months of 2019.
  • New car sales have been driven down by a number of roadblocks – consumer and business caution over making major purchases, sharply reduced demand for diesel cars amid environmental concerns and stricter emission regulations affecting supply. A further hit to the sector has come from the removal of incentives to buy plug-in hybrid vehicles.
  • Private new car sales were particularly weak in November, falling 6.1% year-on-year in November. Consumers currently appear largely cautious in making the major big-ticket purchase of a car amid major domestic, economic and Brexit uncertainties despite recent markedly improved purchasing power and elevated employment. Indeed, GfK reported consumer confidence remained at its equal lowest level so far in 2019 in November (and also its equal lowest level since July 2013). It also looks like the fundamentals for consumers have peaked at least for the time being, with employment and earnings growth both coming off the highs seen around July.
  • Fleet sales were the strongest sector in November, seeing a gain of 2.8% year-on-year. This could be due to some fleet operators feeling they need to replace vehicles after holding off for some time. It is also possible that fleet sales may have got a lift from manufacturers offering large discounts in an attempt to shift stock ahead of the more stringent CO2 targets, which come into effect in 2020.
  • Businesses overall still appear to be cautious over making new car purchases as they are faced by a soft economy together with heightened Brexit and domestic political uncertainties. A number of businesses may well be delaying the replacement of their fleet vehicles, and they could well be further encouraged to do so at least until there is greater clarity over the domestic political situation and Brexit. However, with Brexit uncertainties likely to be appreciable through 2020 and the domestic and global economic outlook challenging, businesses may very well remain cautious over their fleet purchases 
  • UK car manufacturers have been particularly vociferous about the damage to their supply chains and prospects that would come from a "no deal" UK exit from the EU, so they will no doubt be relieved that it looks like the UK will be leaving the EU with a “deal” by the end of January. However, car manufacturers will be seriously concerned about exactly what form the UK’s longer-term relationship with the EU will take and the possibility that a transition arrangement could expire at the end of 2020 without the UK and EU coming to agreement on the way forward. 

Howard Archer, chief economic advisor to the EY ITEM Club, comments:

“The SMMT reported that new car sales fell 1.3% year-on-year to 156,621 vehicles in November. This was the eighth decline in the past nine months and followed a drop of 6.7% year-on-year in October.

“Consequently, new car sales were down 2.7% year-on-year over the first 11 months of 2019 at 2,162,143 vehicles.

“The car sector may take some solace from the rate of year-on-year falls at least slowing to a crawl in November. The car sector can also take some hope from strong demand for alternatively fuelled vehicles which took a record 10.2% share of the market.

“New car sales have been driven down by a number of roadblocks – business and consumer caution over making major purchases, sharply reduced demand for diesel cars amid environmental concerns and stricter emission regulations affecting supply (another round of emissions testing legislation coming into effect on 1 September). A further hit to the sector has come from the removal of incentives to buy plug-in hybrid vehicles.

“Diesel sales fell 27.2% in November as they continued to be impacted by environmental concerns and uncertainties over government measures to counter this.

Private new car sales fell markedly again in November after sharp drop in October

“Private new car sales fell 6.1% year-on-year in November to 65,114 vehicles. This followed a substantial drop of 13.2% in October. They had edged up 0.1% year-on-year in September (helped by new private car sales had plunged 20.1% year-on-year in September 2018), which had been the first increase since February.

“Consequently, private new car sales were down 3.4% year-on-year at 963,409 vehicles over the first 11 months of 2019. This followed a decline of 6.4% in 2018.

“The clear impression remains that consumers are currently cautious in making the major big-ticket purchase of a car amid major uncertainties despite improved purchasing power and elevated employment. Real earnings growth has improved significantly since mid-2018, rising from just 0.1% to a near four-year high of 2.0% in the three months to July 2019. Also helping matters, employment reached a record high of 32.811 million in the three months to June.

“Indeed, GfK reported that consumer confidence remained at its equal lowest level so far in 2019 in November (and also its equal lowest level since July 2013). Furthermore, willingness to make major purchases dipped for a second month running to be at a five-month low in November.

“Meanwhile, the fundamentals for consumers may very well have peaked and they are currently showing some signs of slippage – although they are likely to remain relatively decent which should limit the downside for consumer spending.

“Significantly, employment fell by 58,000 in the three months to September when the level of employment was 32.753 million compared to the peak of 32.811 million in the three months to June. The suspicion has to be that the labour market will falter further in the near-term at least, as companies face a soft domestic economy as well as serious concerns over Brexit, an unsettled domestic political environment and a challenging global economy. October's sharpest drop in vacancies since the end of 2009 fuels this suspicion. Much will obviously depend on what happens with Brexit on 31 January and how the economy reacts.

“Additionally, annual earnings growth eased back to 3.6% in the three months to September from the 11-year high of 3.9% in the three months to July and further slippage looks more likely than not. With employment faltering and businesses cautious over the outlook among major uncertainties, we suspect that they will increasingly look to contain pay increases. Meanwhile, heightened consumer concerns and uncertainties may increasingly facilitate companies’ ability to limit earnings.

“On the positive side, inflation (down to a near three-year low of 1.5% in October) is limited and looks likely to remain so.

“There are other factors which may limit the consumer spending. In particular, with uncertainties high and the outlook problematic, many consumers may be keen to avoid dissaving.

Fleet sales up in November

“New car sales to the fleet sector rose 2.8% year-on-year in November to 86,942 vehicles. This could be due to some fleet operators feeling they need to replace vehicles after holding off for some time. It is also possible that fleet sales may have got a lift from manufacturers offering large discounts in an attempt to shift stock ahead of the more stringent CO2 targets, which come into effect in 2020.

“They had previously edged up 0.3% year-on-year in October and risen 8.6% year-on-year in September (again lifted by a weak base as fleet sales had fallen 22.4% in September 2018). September had been the first rise since April and followed falls of 3.5% in August and 4.7% in July.

“Businesses overall appear to be cautious over making new car purchases as they are faced by a soft economy together with heightened Brexit and domestic political uncertainties. A number of businesses may well be delaying the replacement of their fleet vehicles, and they could well be further encouraged to do so at least until there is greater clarity over the domestic political situation and Brexit. However, with Brexit uncertainties likely to be appreciable through 2020 and the domestic and global economic outlook challenging, businesses may well remain cautious over their fleet purchases.

“Fleet sales edged up 0.3% year-on-year over the first 11 months of 2019 to 1,143,199 vehicles. This followed a decline of 7.3% in 2018.

“Finally, new car sales to the business sector – which are now tiny – were down 3.2% year-on-year in November and were limited to 4,565 vehicles. This followed a drop of 30.3% in October. They were down 35.3% over the first 11 months of 2019 at 55,535 vehicles. They fell 5.6% overall in 2018.”