Press release

6 Apr 2020 London, GB

New UK car sales fell 44.4% in key month of March – EY ITEM Club comments

A disappointing start to the year for new UK car sales took a turn for the worse in the key month of March, as coronavirus had an increasingly negative impact on consumer and business behaviour and car showrooms were closed.

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  • Gloomy results for the UK automotive sector. A disappointing start to the year for new UK car sales took a turn for the worse in the key month of March, as coronavirus had an increasingly negative impact on consumer and business behaviour and car showrooms were closed.
  • March is normally an important month of the year for new sales due to the number plate change.
  • Specifically, new car sales fell 44.4% year-on-year in March to 254,684 vehicles. This was the weakest March performance since 1999 when bi-annual number plates were introduced into the UK. There were 203,370 fewer new cars sold in March than a year ago.
  • The decline was widespread in the sector – private sales fell 40.4%year-on-year, while fleet sales were down 47.4%.
  • Even before the coronavirus impact, the year-on-year fall in new car sales in both February (2.9%) and January (7.3%) had indicated that the sector had not benefitted from reduced uncertainties and increased consumer and business confidence since December's election (reinforced by greater near-term clarity over Brexit with the UK leaving the EU on 31 January with a deal).
  • New car sales have been hampered by a number of roadblocks – consumer and business caution over making major purchases, reduced demand for diesel cars amid environmental concerns and uncertainties over policy, and stricter emission regulations affecting supply.
  • New car sales may continue to struggle until the impact of coronavirus starts to wane and the economy returns to some degree of normality with restrictions on people’s movements eased and businesses starting to benefit from improving activity, including the opening of car showrooms. While there may be some pent-up demand for new cars, the upside is likely to be limited by higher unemployment and reduced financial situations affecting many consumers. Some businesses may also be cautious about upgrading their fleets.
  • Further out, some car manufacturers are concerned about what form the UK’s longer-term relationship with the EU will take. In particular, the potential for less regulatory alignment with the EU and the risk of additional costs, rules, and frictions at the border.

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

The SMMT reported that new car sales fell 44.4% year-on-year in the key month of March to 254,684 vehicles as coronavirus had an increasingly negative impact on consumer and business behaviour and car showrooms were closed.

March is the most important month of the year for new car sales, due to the number plate change, and saw the lowest number of vehicles sold for the month since 1999 when bi-annual number plates were introduced into the UK.

Even before the coronavirus impact, year-on-year drops in new car sales in both February (2.9%) and January (7.3%) had indicated that the sector had not benefitted from reduced uncertainties and increased consumer and business confidence since December's general election (reinforced by greater near-term clarity over Brexit with the UK leaving the EU on 31 January with a deal). Consequently, new car sales were down 31.0% year-on-year over the first three months of 2020 at 483,557 vehicles.

New car sales have been driven down by a number of roadblocks - business and consumer caution over making major purchases, reduced demand for diesel cars amid environmental concerns and uncertainties over policy, and stricter emission regulations affecting supply (another round of emissions testing legislation coming into effect on 1 September).

Diesel sales fell 61.9% year-on-year in March as they continued to be impacted by environmental concerns and uncertainties over government measures to counter this.

Private new car sales saw sharp fall in March

Private new car sales fell 40.4% year-on-year in March to 132,281 vehicles. This followed year-on-year declines of 7.4% in February and 13.9% in January.

Consequently, private new car sales were down 31.0% year-on-year over the first three months of 2020 at 228,034 vehicles.

Even before the coronavirus impact, the sharp decline in private sales over the first two months of 2020 suggested that many consumers were already cautious about splashing out on a new car, even though consumer confidence has risen markedly. This was despite the fact that the fundamentals for consumer spending were relatively decent with unemployment rising strongly to reach a record high in the three months to January, while real earnings growth was 1.5%. Furthermore, GfK reported that consumer confidence was at an 18-month high in February.

Of course, this has all changed with coronavirus impacting the economy, causing many people to lose their jobs or reduce incomes, despite the Government’s supportive measures. Furthermore, GfK reported that consumer confidence fell in the second half of November to be at the weakest level since February 2009 with the major purchase index falling by an astonishing 50 points.

Fleet sales also suffered substantial March drop

New car sales to the fleet sector fell 47.4% year-on-year in March to 117,5557 vehicles. This followed a marginal 0.1% year-on-year increase in February and a decline of 2.2% year-on-year in January.

Consequently, new fleet sales were down 30.4% year-on-year over the first three months of 2020 at 246,248 vehicles.

Finally, new car sales to the business sector - which are now tiny – declined 61.1% year-on-year in March and were limited to just 4,846 vehicles. This followed year-on-year increases of 29.6% in February and 4.2% in January.