New car sales plunge 20.5% y/y in crucial month of September as supplies hit by new testing regulations - EY ITEM Club
04 October 2018
- New car sales plunged 20.5% year-on-year in the crucial month of September with sharp falls in both the private and fleet sectors.
- It is difficult to read too much into September’s figures as sales were impacted by a shortage of new cars available for sale, caused by some manufacturers struggling to deal with the implementation of the new WLTP (Worldwide Harmonised Light Vehicle Test Procedure).
- Manufacturers and dealerships will be hoping that the sales lost in September will be fully made up over the coming months.
- While September’s performance was impacted by special factors, there are significant challenges facing the automotive sector.
- Private sales could be hampered by consumer purchasing power, which is only improving slowly. Meanwhile, consumer confidence is still relatively fragile with consumers cautious about making major purchases. Indeed consumer confidence fell in September according to the GfK measure.
- Furthermore, recently higher petrol and diesel prices are hardly the best news for the automotive sector, although they do increase interest in more fuel efficient cars and alternatively fuelled vehicles.
- Businesses may also be cautious in their car purchases amid significant economic and Brexit uncertainties. Some businesses may choose to delay replacing their vehicles, until the outlook becomes clearer.
- Car sales are likely to be hampered by pressure to restrict car finance deals and unsecured consumer credit. The Bank of England has shown growing concern over this and is keen for a more responsible approach to be adopted. This is magnified by concerns over the resale value of cars at the end of Personal Contract Purchase (PCP) deals.
Howard Archer, chief economic advisor to the EY ITEM Club, comments:
“The Society of Motor Manufacturers and Traders (SMMT) reported that new UK car registrations plunged 20.5% year-on-year to 338,834 units in the crucial month of September when number plates change.
“Car sales had already been down year-on-year even before September’s problems. Consequently, new car sales were down 7.5% year-on-year over the first nine months of 2018 at 1,910,820 units.”
Private car sales down sharply in September….
“Private new car sales fell 20.1% year-on-year in September at 162,972 units.
“Private new car sales were down 6.9% year-on-year over the first nine months of 2018 at 859,109 units. This indicates that consumers have been cautious over making major purchases as the extended squeeze on their purchasing power only gradually eases.”
….As were Fleet sales
“New sales to the fleet sector fell 22.4% year-on-year in September to 155,417 units.
“Fleet sales were down 8.0% year-on-year over the first nine months of 2018 at 974,922 units. Even allowing for uncertainty over government policy on diesel cars affecting fleet sales, it appears that that some businesses have been reluctant to replace or add to their fleets amid a cloudy economic outlook fuelled by Brexit uncertainties.
“Finally, new car sales to the business sector fell 6.3% year-on-year in September, although this sector is now very small with sales at just 20,445 units in September.”