Press release

5 Mar 2024 London, GB

More growth for UK automotive despite intensifying challenges for automakers

Despite February typically being a lower volume month for UK new car registrations owing to the March plate change, last month marked the 19th consecutive month of growth for the UK auto industry.

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Senior Executive, Media Relations, Ernst & Young LLP

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David Borland, EY UK & Ireland Automotive Leader, comments on the Society of Motor Manufacturers and Traders (SMMT) new car registration figures for February 2024:

“Despite February typically being a lower volume month for UK new car registrations owing to the March plate change, last month marked the 19th consecutive month of growth for the UK auto industry. In total, 84,886 new car registrations were recorded in February 2024, representing a 14% year-on-year increase and the best performance in February for 20 years. 

“However, the UK new car sales market continues to face persistent headwinds, including ongoing consumer confidence challenges, due in part to cost-of-living pressures following months of high inflation and interest rate rises. Adding to this are changes in go-to-market strategy with Original Equipment Manufacturers (OEMs) looking to find ways to adapt with the agency model, while negotiating the ongoing challenges posed by regulators on finance and insurance products.

“In response, OEMs have ramped up sales incentives and discounts offered to consumers to boost demand, as we see clear signs of a return towards the ‘supply push’ model. 

“Battery Electric Vehicles (BEVs) were up 21.8% year-on-year and Plug-in Hybrid Electric Vehicles (PHEVs) were up 29.1%. Despite the growth, the percentage of BEVs sold so far this year in terms of market share is 15.8%, which is lower than 2023 and below the 22% target of the ZEV mandate. In part, this will be due to consumer hesitancy caused by the delay to the Internal Combustion Engine (ICE) sales ban, ongoing concerns about charging infrastructure adequacy and more recent issues around BEV residual values and insurance premiums. PHEVs, meanwhile, continue to be a transitional solution, in large part due to allaying those infrastructure concerns whilst giving an environmental “feel-good” factor to consumers.

“As with previous months, fleet remains the key driver of registration volume growth, with a 25% increase year-on-year. The absence of EV-related subsidies for private retail consumers, as well as ongoing high retail prices and reduced affordability of finance given higher APRs, continues to drag on this segment of the market. Furthermore, fleet sales into corporates and their employees typically see a skew towards premium models which are then de-fleeted into the used car market and are often unaffordable to many consumers – which has been one contributing factor to used BEV price dynamics recently. As such, a sustainable recovery in the retail new car registrations segment is needed for the UK to be confident of realistically hitting the emissions-related targets now in place.”

Forward look

Edwin Kemp, Automotive Strategy Director, EY-Parthenon, said:

“March is a pivotal month in the UK automotive calendar – not only because of the new registration plates but also the Chancellor’s Spring Budget announcement. VAT cuts on car purchases and public charging costs could be a vehicle for the Chancellor to support the UK’s EV transition. 

“More broadly, with the Zero Emission Vehicle (ZEV) Mandate now a legal requirement, manufacturers must focus on levers to grow these sales in both fleet and retail channels, without negative effects on sustainable profitability. Further consideration around how to make the EV experience a convenient and confident one for consumers – both across purchase and usage, including charging – will be crucial.

“One key enabler for automakers to make the transitional period between early EV adoption and mass uptake as smooth as possible will be the ability to finance improving the overall consumer proposition associated with EVs.”