- New UK car sales dropped markedly in May as dealerships remained closed. The SMMT reported new car sales fell 89.0% year-on-year in May to 20,247 vehicles from 183,724 in May 2019. This was a slight improvement on April when just 4,321 vehicles were sold, the lowest level since 1946 and a drop of 97.3% year-on-year
- There were significant year-on-year declines in May in both private (83.8% to 12,900 vehicles) and fleet (93.4% to 6,638 vehicles) sales. The SMMT reported that new car sales in May were largely the result of ‘click and collect’ services that were allowed from mid-month
- Car showrooms have been allowed to be open from 1 June as long as guidelines are met. Nevertheless, a concern for the sector will be how much demand will recover over the coming months
- The near-term fundamentals for consumer spending have taken a downturn as a result of coronavirus. Consumers may adopt a cautious approach to discretionary purchases, such has new cars, given a still uncertain outlook. Businesses may well be especially cautious over their costs, and this could lead to delayed fleet purchases
- The new car sector was struggling even before coronavirus brought activity to a virtual standstill
- Car manufacturers will be looking for clarity on what form the UK’s longer-term relationship with the EU will take. Front of mind for companies with integrated supply chains are questions around whether there will be added costs, new rules, and added border controls
Howard Archer, chief economic advisor to the EY ITEM Club, comments:
“The SMMT reported that new car sales were down 51.4% year-on-year over the first five months of 2020 at 508,125 vehicles.”
“It is worth noting that 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 early on in 2020 following December's decisive general election.
“There was a drop of 44.4% year-on-year to 254,684 vehicle sales in March, which is often a key month due to number plate changes, as COVID-19 had an increasingly negative impact on consumer and business behaviour, culminating in the lockdown on 23 March when car showrooms were closed.
“Even before the coronavirus impact, new car sales had been limited by a number of challenges: business and consumer caution over making major purchases, sharply reduced demand for diesel cars amid environmental concerns and uncertainties over policy, and stricter emission regulations affecting supply.
“Diesel sales fell 93.0% year-on-year in May.”
Private new car sales down 83.8% year-on-year in May
Howard Archer continues: “Private new car sales fell 83.8% year-on-year in May to 12,900 vehicles. This was up from just 871 vehicles sold in April (a 98.7% year-on-year drop) but compared unfavourably with sales of 79,400 in May 2019. There had earlier been declines of 40.4% in March, 7.4% in February and 13.9% in January. Consequently, private new car sales were down 49.4% year-on-year over the first five months of 2020 at 241,761 vehicles.
“Even before the coronavirus impact, the decline in private sales over the first two months of 2020 did not suggest that consumers had become more willing to splash out on a new car, even though consumer confidence had risen markedly. Real earnings growth was around a decent 1.5%, while GfK reported that consumer confidence was at an 18-month high in February.
“The near-term fundamentals for consumer spending have taken a substantial downturn as a result of coronavirus. Many people have lost their jobs, despite the supportive Government measures, while others may be worried that they may still end up losing their job once the furlough scheme ends. Additionally, many incomes have been affected. Furthermore, consumers are likely to adopt an extended cautious approach to discretionary purchases given the current economic environment. This could be especially the case for big-ticket items such as new cars. Indeed, Gfk reports that consumer confidence is currently at the lowest level since 2009.”
Fleet sales also suffered May drop
Howard Archer adds: “New car sales to the fleet sector fell 93.4% year-on-year in May to 6,638 vehicles. This followed a 96.6% year-on-year fall in April to 3,090 vehicles when the SMMT indicated that most of the fleet sales had likely been on order before the lockdown.
“Consequently, new fleet sales were down 53.0% year-on-year over the first five months of 2020 at 256,020 vehicles.
“Finally, new car sales to the business sector – which are now tiny – declined 81.1% year-on-year in May and were limited to just 709 vehicles. This followed a drop of 88.3% in April.”