David Borland, EY UK & Ireland Automotive Leader, comments on the Society of Motor Manufacturers and Traders (SMMT) new car registration figures for March 2024:
“The new plate month of March 2024 delivered 317,786 new car registrations, marking the 20th consecutive month of growth for the UK auto industry as well as representing a 10.4% year-on-year increase and the best March since 2019.
“These results underscore the continued resilience of the sector despite a variety of persistent headwinds. This includes ongoing consumer confidence challenges, due in part to interest rates staying high for longer than many anticipated, and a complex and evolving regulatory environment in relation to decarbonisation as well as finance and insurance products.
“In response, Original Equipment Manufacturers (OEMs) have ramped up sales incentives and discounts offered to consumers to boost demand, and we are seeing clear signs of a return towards the ‘supply push’ model. However, how sustainable such incentives will be longer term remains to be seen.
“Battery Electric Vehicle (BEV) sales were up by 3.8% year-on-year in March, while the appeal of Plug-in Hybrid Electric Vehicles (PHEVs) as a transition technology continued to be evident, with sales up 36.7% compared to March 2023. Despite this growth, the percentage of BEVs sold so far this year in terms of market share declined to 15.2% last month, down from 15.8% in February, meaning BEV market share remains substantially below the 22% target of the ZEV mandate. This is likely to be due, in part, to ongoing consumer hesitancy caused by the delay to the Internal Combustion Engine (ICE) sales ban, persistent concerns about charging infrastructure adequacy and more recent issues around BEV residual values and insurance premiums.
“As with previous months, fleet remains the key driver of registration volume growth, with a 29.6% increase year-on-year. However, March’s outlook for private sales was much more subdued, with a year-on-year decline of 7.7%. Indeed, 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.”
Forward look
Ali Fitt, EY UK Automotive Indirect Tax Director, said:
“March is a pivotal month in the UK automotive calendar – not only because of the new registration plates but also due to the Chancellor’s Spring Budget announcement.
“The Spring Budget brought some encouragement to the sector, with a freeze in fuel duty, a proposal to extend full expensing to leased assets and reaffirming the government’s recent announcement to invest over £270m in Advanced Manufacturing.
“There was however speculation in the run up to the Spring Budget as to whether a reduced rate of VAT would be introduced for new EVs and if there would be a change to the VAT treatment of public charging (otherwise known as the ‘pavement tax’), in support of the UK’s EV transition. Ultimately, these measures did not materialise, which may have felt like a missed opportunity to some parts of the automotive sector.
“However, the market continued to show admirable and robust momentum during Q1, which bodes well for prospects across the remainder of 2024.”
