Press release

6 Sep 2021 London, GB

No let off for the UK car market as supply chain woes continue to hamper sales

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Related topics Automotive

David Borland, EY UK & Ireland Automotive Leader, comments on SMMT new car registration figures for August:

“UK passenger car registrations in August were at 68,033 units, which was a 22% decrease compared to the same month last year and 27% below pre-pandemic August 2019, according to data released by the SMMT. This stark picture is a reflection of the semiconductor shortage affecting automakers globally, threatening to hamper a cautious recovery (YTD 2021 is at 20.3% above 2020). The domestic car industry continues to operate in a highly unusual environment, hampered by supply shortages whilst responding to changing consumer demand patterns. 

Clean air trumps black gold?

“As in previous months, electric vehicles (BEV, PHEV) continued to outperform the rest of the sector. Sales of electric vehicles increased by 46% year on year, commanding 18% of all sales in August – providing the otherwise gloomy sales figures with the proverbial silver lining. By 2033, EV sales in the US, China and Europe will outstrip all other engines five years sooner than previously expected, according to new EY research and analysis. Find out more here: Electric vehicles to dominate sales five years sooner than expected – EY analysis

‘Supply Chain’-ing down new car sales

Philipp Schartau, from EY’s UK & Ireland Advanced Manufacturing & Mobility Team, added :

“The industry continues to grapple with the effects of the crisis in the supply chain. A shortage of semiconductors has forced many automakers to halt or reduce production, with severe implications on the number of new car deliveries in the UK. There is no immediate end in sight and initiatives to secure greater supply volumes for OEMs and Tier 1 suppliers are expected to take months to bear fruit. As a result, other automotive suppliers whose orders are cut may face financial difficulty causing further disruption down the line.

How much is that car sitting in the driveway worth?

“The lack of new cars has led to consumer focus shifting towards used cars. In Q2 2021, used car sales increased by 108% compared to Q2 2020 with the popularity of used plug in vehicles soaring by 350% in Q2. The used car market has continued to step into the void created by unavailability of new cars, leading to a significant uptick in residual values. 

What lies ahead

“The supply chain crisis has led automakers to pursue alternate strategies to secure their supply chains including shutting down production for short durations, purchasing directly from manufacturers and establishing trade agreements with governments to source chips securely. The knock-on effect of the semi-conductor shortage on vehicle production and sales is expected to continue into 2022. Despite the above, the overall positive trend in year over year metrics is expected to continue. 

“The recovery will continue to be shaped by disruptive forces in the supply chain, accelerated vehicle electrification and continued industry response in terms of mergers and acquisitions. In addition, EY analysis (EY Mobility Insights) suggests that some consumers now appear more interested in car ownership than before COVID-19, which should further aid the recovery.”