David Borland, EY UK & Ireland Automotive Leader, comments on SMMT new car registration figures for September 2022:
“The new registration plate month of September brought some joy for the UK car market despite the ongoing trilemma of financial, energy and supply chain pressures continuing to impact consumers and the automotive sector. Over 225,000 new cars were registered in September, which was an increase of 4.6% compared to 2021, but still 34% down compared to pre pandemic 2019. With further signs of promise, some of the challenges in production continue to ease, as the UK marked its fourth consecutive month of growth for passenger cars, with commercial vehicle production recording a 93% increase in August, marking eight consecutive months of growth.
Electric Vehicle (EV) sales
“Despite the withdrawal of the Plug-in-Grant earlier this year, sales of Battery Electric Vehicles (BEVs) continued to increase. Registrations of new BEVs increased by 16.5% in September with a year-to-date increase of over 40%. Plug in hybrids continued their demise with an 11.5% and 15% reduction respectively. This now means that there are over 1 million plug-in vehicles on UK roads, which is the first of many tipping points to come.
“Additionally, interest in UK based EV manufacturing plants from global OEMs bodes well for the country’s EV adoption plans in the future. Time will tell what impact the increased pricing for electricity has on the rise of plug-in vehicles, with consumers balancing the up front and ongoing costs. Another challenge that is being mounted is the difference in VAT between public and private charging. Given the cost of everything crisis, every penny will count.
Manu Varghese, from EY’s UK & Ireland Advanced Manufacturing & Mobility Team, adds:
“The economic crisis the country faces right now is impacting both OEMs and dealers. With gas and electricity tariffs expected to rise by more than 250%, the sector is having to rethink how they control energy costs. Strategies related to energy sourcing and cost controlling are at the forefront of every CFO’s mind. In addition, volatility in the Bank of England interest rates is affecting consumer confidence due to the high dependence on financing solutions for the new car market. The bad news for the sector is that further interest-rate hikes are to be expected as the BoE attempts to bring rising inflation under control which could further negatively impact the sector.
Forward Look
“Despite consecutive months of manufacturing growth, sustained losses from global supply shortages continue to disrupt the industry. This is supported by early indicators from the Purchasing Managers Index for manufacturing in September with the survey pointing to an acceleration in cost and inflationary pressures, reversing the recent trend. On the positive side, a major China based automotive group announced an 8% stake in a British luxury carmaker. This comes just a few months after Saudi Arabia’s public investment fund invested £78m in the same OEM. Additionally, several dealer groups reported the continuation of significant profits in 2021 & the first half of 2022, driven primarily by used car sales and favourable margins. Also, one of the UK’s largest car dealers has had ongoing interest from the US and Europe, a sign that there is value in the domestic UK dealer sector. However, the industry needs further reform and governmental action to help drive investment and growth. Urgent steps, beyond the temporary energy price, are required to support the sector during this uncertain environment.”
