- An unsurprising end to a challenging year for the car sector as new sales were affected again by the closure of showrooms in many areas late on in December. This countered the boost to sales earlier in the month when showrooms re-opened in England after the November lockdown.
- New car sales fell 10.9% year-on-year in December, with sales of 132,682 marking the weakest December performance since 2008. Private car sales fell 13.9% year-on-year in December; fleet sales were down 8.3%.
- New car sales were down 29.4% over 2020 at a 28-year low of 1,631,064. Private car sales fell 26.6% over 2020; fleet sales were down 31.1%.
- While COVID-19 restrictions affected new car sales in 2020, they by no means account for all the sector's performance.
- The car sector faces a challenging start to 2021 with showrooms closed in most regions and set to remain so for some weeks to come. The new car sector will then be hoping that consumer and business confidence will be buoyed as 2021 progresses by the roll-out of vaccines and that this lifts both consumers and businesses’ willingness to buy new cars.
- Many consumers look to be relatively well placed to buy a car given the very high household savings ratio seen over Q2 and Q3 2020. Much is also likely to depend on how well the labour market holds up – especially after the furlough scheme ends in April.
- While the car sector will be relieved that the UK and EU has come to a Free Trade Agreement, it will nevertheless face an altered environment with new regulations and other non-tariff barriers now in place.
Howard Archer, chief economic advisor to the EY ITEM Club, comments:
“The SMMT reported that new car sales saw a substantial decline of 10.9% year-on-year to 132,682 vehicles in December.
“December’s new car sales were affected by the closure of showrooms in many parts of the UK as tighter restrictions were introduced later on in the month. Earlier in December there had likely been some boost to sales from the re-opening of car showrooms after the English November lockdown ended. New car sales had fallen 27.4% year-on-year in November.
“While the COVID-19 restrictions have affected 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.
“Indeed, new car sales only achieved one monthly year-on-year gain in 2020: the 11.3% increase 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.
“Consequently, new car sales fell 29.4% over 2020 with the total 1,631,064 vehicles being the lowest since 1992. This annual decline was the largest since 1943.”
Private new car sales and fleet sales fell in December
Howard Archer continues: “Private new car sales fell 13.9% year-on-year in December, following a decline of 33.2% year-on-year in November. Private new car sales fell 26.6% over 2020.
“New car sales to the fleet sector also saw a marked decline in December, falling 8.3% year-on-year after a decline of 22.1% year-on-year in November. Fleet sales fell 31.1% over 2020.”