Press release

6 Jun 2022

EY comments on SMMT May new car sales

EY comments on SMMT new car sales for May. Only 124,000 cars were registered in May – this is a 20.6% decrease over 2021 and almost a third lower than pre-pandemic 2019.

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  • EY comments on SMMT new car sales for May
  • Only 124,000 cars were registered in May – this is a 20.6% decrease over 2021 and almost a third lower than pre-pandemic 2019.

Same script different month for the UK car industry

David Borland, EY UK & Ireland Automotive Leader, comments on SMMT new car registration figures for May 2022:

“The UK car industry continues to reel under the trilemma of supply chain pressures, geopolitical unrest and rising inflation. May was a similar story to the first four months of the year, as SMMT data showed that just over 124,000 cars were registered in May which was a 20.6% decrease over 2021 when car showrooms were open for the first full month after lockdown, but almost a third lower than pre-pandemic 2019.

Manu Varghese, from EY’s UK & Ireland Advanced Manufacturing & Mobility Team, adds:

“Although supply chain disruptions during the COVID-19 pandemic have been a causal factor for the challenges experienced today, recent geopolitical tensions in Europe have further aggravated this crisis. Also, the rapid shift to electric vehicle (EV) production has created an emerging risk related to EV battery availability because of dependence on minerals mined in countries impacted by the geopolitical volatility. Automotive companies have, to a certain extent, managed to acclimatise to the supply chain challenges by reducing production with several OEMs embarking on supply chain transformation initiatives given its criticality and a recognition that the crisis could get worse before it recovers.

Higher margins

“Record levels of unfulfilled orders have also forced automakers to optimise their product and production mix. Forward looking statements issued by automakers have indicated a shift to higher margin variants both in the UK, and globally. With production capacity being constrained by raw material shortages and availability of components, OEMs are closely reviewing their offerings, increasing pricing and also scaling back variable marketing expenditure. The sector also saw a marginal decrease in used car prices as the market slightly course corrected, following more than a year of sustained increase in prices.

Electric car sales on the up

“World leaders and industry analysts at the World Economic Forum (WEF) spoke about the need to focus on sustainable business practices, including sustainable transportation solutions. The EV market in the UK continues to grow, with SMMT data revealing that 18% of new cars are plugins in May 2022, with pure battery 12.4%, an increase of 17.7% from 2021.

“This increase has been reflected in the latest research from EY; the number of UK consumers looking to buy electric vehicles has hit a tipping point, according to the latest EY Mobility Consumer Index. The research shows that nearly half of respondents (49%) looking to buy a car would choose an EV – representing an increase from 21% percentage in just two years.

“However, the supply chain crisis has not fully spared the EV industry. In addition to a shortage of semi-conductors, the shortage of electric car batteries is expected to impact the sector, making batteries the next supply chain buzzword after semi-conductors. One of the big OEMs announced plans to increase production of their higher end EV models, while some other less profitable EV models have been shelved leading to waiting queues in excess of one year.

Forward Look

“As cliched as it may sound, we are truly at the crossroads of history as the UK continues its transition to a future without ICE vehicles. As well as the progress we see each month on new car sales, there was a 71% increase in the number of plug-in vehicles on the road in 2021 rising to almost three quarters of a million.

“The domestic EV market saw a major announcement from a British EV battery manufacturer confirming they had acquired a German based battery cell manufacturer and a new facility in the midlands. Additionally, a well-known EV chassis manufacturer announced plans to build an assembly plant in Coventry. To ensure the positive steps made by the sector are not wasted, concerted and collaborative action by the Government and the industry are required to manage supply chain concerns and scale up the country’s charging infrastructure.”