Press release

5 Nov 2020 London, GB

Challenging final quarter for automotive sales expected as lockdown 2.0 and Brexit weigh heavy

David Borland, EY UK & Ireland Automotive Leader, comments on today’s SMMT new car registration figures for October

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EY UK

Multidisciplinary professional services organisation

David Borland, EY UK & Ireland Automotive Leader, comments on today’s SMMT new car registration figures for October:

"Despite the ever-challenging landscape for the sector, with consumer confidence significantly dented by the pandemic and the prospect of lockdown 2.0 looming large, prior to October dealers and Original Equipment Manufacturers (OEMs) reported strong Q3 performance.

"While volumes and revenues remain subdued in the quarter, there are positive signs with many manufacturers and dealers reporting increases in profits. This is being driven by manufacturers using their reduced capacity to focus on a more profitable product mix and the continuing strength of the used car market helping to buoy dealer performance.

After a new plate boost, sector struggles in October

"In the final quarter of what has been a tumultuous year for the sector, and with October being a typically lower than average month following the spike in new plate registrations in September, today’s results of 1.6% versus the same month last year continue to show the industry struggling despite a partial resurgence post lockdown. For the full year to date, registrations are down -31%.

"This will be further exacerbated by the second national lockdown but despite showrooms closing until December at least, there is a strong view that dealers are much better prepared this time around, having adapted sales processes and embraced new technologies allowing consumers a more immersive digital sales & contactless experience."

A glance at Europe

"A similar picture has emerged for the sector in Europe with sales stalling following some encouragement in Q3. What we are also seeing across Europe is an increasing trend of governments support targeting ‘green’ vehicles, and many here in the UK sector will be looking for similar levels of support. In the UK, Battery Electric Vehicles almost achieved 50% of the diesel volume, up from 14% in January which highlights the significant shifts we are seeing."

Brexit weighing heavily, but still time to prepare

"From the conversations I’ve had with clients, Brexit is weighing heavily both in terms of the uncertainty it is creating for OEMs and their supply chain and operations, and also the affect it is having on consumer confidence.

"Many in the industry are likely to be impacted by Brexit due to the high level of cross border movement of finished vehicles and parts, that generates over £100bn in trade. Almost 90% of passenger cars sold in the UK are imported with 70% coming from the EU, and 80% of cars produced are exported, with greater than 50% heading to the EU.

"Given the significant volumes of trade between the UK and EU, we are urging those in the sector to review their business processes, operations and systems now, so that on Brexit day-one they are ready to hit the ground running."