David Borland, EY UK & Ireland Automotive Leader, comments on the Society of Motor Manufacturers and Traders (SMMT) new car registration figures for March 2023:
“The new plate month of March ’23 delivered the eighth consecutive month of growth with over 287,000 new registrations – an 18% increase compared to 2022. This resulted in the highest volume for Q1 since 2019, with almost half a million cars sold.
“There was further positive news for the sector on the supply side, as UK manufacturing output rose by more than 13% in February. The £67bn car industry, an important part of the UK’s economy, continues to display resilience in the face of challenges from the trilemma of supply chain disruption, financial pressures and the move to net zero.
“The Spring Budget brought some encouragement to a sector that has been facing a series of challenges since early 2020. While the CAPEX tax concessions and advanced manufacturing investment zones will likely help to drive investment, the UK government has also launched a final consultation on the Zero Emission Vehicle (ZEV) mandate. Given the different powertrain technology available in the short term – and the long development cycle times for new vehicles – the new targets set by the Government will be challenging for some car manufacturers. Having flexibility to meet targets will be critical for manufacturers given the required capital investment, reskilling and recruitment, training and time needed to bring new products to market.”
Manu Varghese, from EY’s UK & Ireland Advanced Manufacturing & Mobility Team, adds:
“Electric Vehicle (EV) sales continued to reach new heights in March with battery electric vehicles achieving their largest ever monthly volume, with over 46,000 sales. The growth in sales was underpinned by an increase in EV manufacturing with combined hybrid, plug-in and electric vehicle production volumes rising 72.2%, and accounting for almost 40% of cars produced in February 2023.
“Despite the demand for EVs, the UK’s charging infrastructure is a limiting factor. This was recognised by UK Government as part of Powering Up Britain, with an investment of £380mn for charging points and infrastructure across the country.
“The impact that this will have remains to be seen, as other countries support investment in their net zero ambitions. For example, The US has announced a $2tn package for infrastructure, including its flagship $370bn Inflation Reduction Act. Further details have recently been announced which will help consumers save up to $7,500 on a new clean vehicle. Vehicles eligible for the credit must undergo final assembly in North America and meet sourcing requirements for both the critical minerals and battery components contained in the vehicle. A clear sign of the importance of manufacturing in a domestic market.
“With the UK car industry facing competition both in the domestic and export markets, UK-based Original Equipment Manufacturers (OEMs) require further support to be competitive. Asia and North America are providing political and economic backing for their automotive sectors, strengthening their investment prospects – something the UK car market could benefit from. March 2023 was a landmark month for the industry with key policy announcements, and evidence that much of the economic impact of the pandemic is now behind us. Further measures to scale up the industry and deliver sustainable growth for the sector are required and expected in the remaining months of 2023.”