- Unsurprisingly, new car sales were significantly affected in November by the closure of showrooms in England as part of the lockdown measures introduced earlier in the month. Sales fell 27.4% year-on-year to 113,781, marking the weakest November performance since 2008
- November’s decline in new sales was significantly less than occurred after the 23 March lockdown. There were reports of November’s sales decline being limited by internet sales and dealers offering offer click-and-collect services
- Private car sales decreased 32.2% year-on-year in November; fleet sales were down 22.1%
- The car sector will be relieved that showrooms are now open again. But there are still uncertainties over the outlook for the sector, magnified by a still real possibility that the UK and the EU may not come to an agreement over their future trading arrangement
- The EY ITEM Club suspects that the upside for consumer spending over the next few months at least will be constrained by significantly higher unemployment and limited pay. Additionally, consumer caution may continue in the near term due to economic uncertainties and concerns over COVID-19. This may limit willingness to make big-ticket purchases, such as a car
- Businesses may also remain cautious over the outlook in the near term at least, and may feel compelled to delay fleet purchases
- The car sector will be hoping that consumer and business confidence will be buoyed over 2021 by the successful rolling out of a COVID-19 vaccine and that this lifts demand for new cars.
Howard Archer, chief economic advisor to the EY ITEM Club, comments:
“The SMMT reported that new car sales experienced a substantial decline of 27.4% year-on-year to 113,781 vehicles in November. This was the weakest November performance since 2008.
“November’s new car sales were obviously affected by the closure of showrooms in England as part of the lockdown measures introduced earlier in the month. There were reports that November’s overall decline in new car sales was limited by internet sales and dealers offering offer click-and-collect services.
“Positively, new car sales in November held up much better than in April and May when showrooms were shut as part of the first national lockdown. New car sales amounted to just 4,321 in April (the lowest level since 1946) when they fell 97.3% year-on-year, and 20,247 in May when they were down 89.0% year-on-year.
“While the COVID-19 restrictions have had a major impact on new car sales this year, the softness has run deeper than that. Apart from the restrictions on activity between March and June, a number of other factors appear to have weighed on new car sales: 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 have only achieved one year-on-year gain so far in 2020: the 11.3% growth in July when there was a strong element of pent-up demand as people who had wanted to buy new cars since March were finally able to get to showrooms across the UK.
“In October, there was a decline of 1.6% year-on-year to 140,945 vehicles, although half of this drop was due to the lockdown in Wales closing showrooms. This was the weakest October performance since 2011 and marked a further disappointing performance after a decline of 4.4% year-on-year in September, which is a key month due to the change in number plates. 2020 was the weakest September for sales since the dual number plate system was introduced in 1999.
“Consequently, new car sales are down 30.7% year-on-year, at 1,498,382 vehicles over the first 11 months of 2020.”
Private new car sales saw largest drop in November, falling 33.2%
Howard Archer continues: “Private new car sales fell 33.2% year-on-year in November. They had previously edged up 0.4% year-on-year in October after declines of 1.1% in September and 1.7% in August. They had made the strongest gain in July when they rose 20.4% year-on-year to 79,929 vehicles, indicating that they particularly benefitted from released pent-up demand.”
Fleet sales saw 22.1% drop in November
Howard Archer continues: “New car sales to the fleet sector also saw a marked drop in November, falling 22.1% year-on-year. There had been previously been decreases of 3.3% in October, 5.8% in September and 5.5% in August and a gain of 5.2% in July.”
Future UK-EU relationship an issue for UK car sector
Howard Archer adds: “Car manufacturers will be affected substantially by the form the UK’s longer-term relationship with the EU will take.
“In particular, car manufactures will be monitoring the genuine possibility that the UK and EU may fail to reach a free trade agreement by the end of the year when the transition arrangement ends.
“Furthermore, even if a free trade agreement between the UK and EU is ultimately reached – as the EY ITEM Club expects – the UK car sector may well be affected by increased non-trade factors in the form of customs bureaucracy and some regulatory barriers. These are particular issues for industries with integrated supply chains – notably the car sector.
“The car sector will also be disappointed that negotiators have been unable to secure generous ‘rules of origin’ commitments that would allow the export of British cars to the EU market tariff-free even if they were largely made of components sourced from countries outside the UK and EU.”