The UK new car market declined again in October, with registrations falling by -1.6% year on year, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).
The industry recorded 140,945 new registrations last month, making it the weakest October since 2011 and 10.1% lower than the average recorded over the last decade.
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The trade body said that the arrival of new models and ongoing financial incentives helped initially to sustain UK demand in the month, but the introduction of a ‘firebreak’ lockdown in Wales on 23 October contributed to the nation recording 25.5% fewer registrations by the end of the month, which accounted for more than half of the overall UK decline.
Subdued activity from businesses drove much of the month’s drop, with around 2,500 fewer vehicles joining larger fleets than in October last year, while private registrations saw a modest increase of 0.4%. However, this performance was flattered by a weak October 2019, when ongoing supply issues arising from regulatory challenges, as well as political and economic uncertainty ahead of the anticipated Halloween Brexit withdrawal date, saw overall registrations by private buyers recede by -13.1% in the month.
As of mid-October, the industry had been expecting to register about 1.66m new cars in 2020. However, with the announcement of a second lockdown for England, which will include the closure of vehicle showrooms, the market forecast has been downgraded by a further 100,000 units to 1.56m. This equates to a total year-on-year decline of around 750,000 registrations and a £22.5bn loss in turnover, with 2020 now likely to be the weakest year since 1982.
While the continuation of click & collect and delivery services is welcome, and should help prevent a return to the sales wipe-out experienced in the spring, the SMMT said it cannot offset the loss of custom from the closure of showrooms themselves, given the unique nature of the car purchase process.
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By GlobalDataMike Hawes, SMMT chief executive, said, “When showrooms shut, demand drops, so there is a real danger that with England today entering a second lockdown, both dealers and manufacturers could face temporary closure. What is not in doubt, however, is that the entire industry now faces an even tougher end to the year as businesses desperately try to manage resources, stock, production and cashflow in the penultimate month before the inevitable upheaval of Brexit.
“Keeping showrooms open – some of the most Covid-secure retail environments around – would help cushion the blow but, more than ever, we need a tariff-free deal with the EU to provide some much-needed respite for an industry that is resilient but massively challenged.”
Industry reaction
Sue Robinson, chief executive of the NFDA, said: “Dealers will continue to comply with the regulations to arrange the delivery of cars and, where possible, meet customers’ aftersales servicing needs, in particular, to support key workers and all those who need a car to go to work or for other essential needs.
“Vehicle showrooms were the first industry sector to reopen on 1 June, operating to Covid-secure guidelines. There is no evidence that dealerships have caused the spread of Covid-19 and shutting showrooms for four weeks can damage the livelihoods of the 590,000 people employed in vehicle retail as well as the 168,000 people employed in vehicle manufacturing.”
Ian Plummer, director at Auto Trader, said: “Our data shows sustained consumer appetite with audience numbers remaining high at over 62m, up 25% on last year, and the number of brand new car and van leads sent to retailers up 150% compared with October 2019.
“New car registrations are a reflection of a strong natural retail demand, which has meant retailers haven’t been doing the same month-end forced activity, including tactics like self-registering cars. All anecdotal feedback from retailers and manufacturers suggests that just a week ago they were tracking as much as 20% higher than last year, so although October’s overall registrations were flat, they were driven by organic consumer demand.”
Seán Kemple, Managing Director at Close Brothers Motor Finance, said: “There is a diamond nugget in the crown of coal. It’s a pivotal moment in the electrification of the UK car market, and consumers are driving the change toward greener roads. Electric vehicles now hold over 35% share of total new car registrations and rapid growth means we could hit 400,000 total electric and hybrid new cars sold by the end of the year.
“Established carmakers are ramping up electrification, with the likes of Volkswagen and Mercedes Benz producing popular models. We’re sitting on an opportunity to further ramp up growth and to jump toward the country’s greener goals but, to do so, Government support is vital. Just as hospitality and the property industry have been boosted by consumer incentives like Eat Out to Help Out and the stamp duty freeze, the car market is in need of a similar initiative.”
Michael Woodward, UK automotive lead at Deloitte, said: “Whilst private sales have returned to near pre-pandemic levels, today’s national lockdown measures will see showrooms close their doors once again.
“The impact of a second lockdown is likely to be significant, but the industry is better placed to cope this time around with many dealers and manufacturers improving their online presence, alongside continued trade in service and parts businesses.
“However, uncertain economic conditions and the prospect of further unemployment means consumers continue to put off major purchases. Dealers and manufacturers will have to work hard to convince prospective buyers that they are getting value for money when restrictions eventually lift.”
James Fairclough, chief executive of AA Cars, said: “The steady decline in sales is a sign that consumers are holding onto their money, with many concerned about their job security and what may happen to their finances in the future.
“This, along with November’s new lockdown, suggests that recovery is likely to be slightly more challenging in the latter part of 2020, and that dealers may need to find innovative ways to entice customers to forecourts.
“The pressure on new car sales may also be the product of the rising popularity of used vehicles. The most recent ONS consumer price inflation index showed transport costs rose for the first time since March, as demand for second-hand cars increased. AA Cars’s data shows demand for used cars has risen 15% compared to last year.”
Karen Hilton, chief commercial officer at heycar, said: “The rollercoaster of 2020 continues – but the automotive industry is much better set up to deal with what lies ahead. Things don’t feel as uncertain as they did back in March.
“One thing we learned from the first lockdown is that more time at home means more browsing online for cars and smart dealers are already there, getting leads, nurturing them and following up. It will be very interesting to see the level of demand from car buyers in a month that has historically included a lot of online purchasing from Black Friday and related offers. Selling and buying cars online isn’t a temporary shift, this is it now and businesses need to do everything they can to adapt and survive.”
James Hind, founder and chief executive of carwow, said: “As we enter the second lockdown, positivity is far higher within the industry, with our poll to car dealers showing 83% say they are better prepared than the first lockdown. Crucially, the government have clearly said that dealers can offer delivery and click-and-collect.
“Dealers are in a much better position this time around too, and whilst showrooms won’t be open for a few weeks for browsing, car dealer’s digital sales teams are ready, and Covid-safe click and collect & delivery options are in place, which will lead to far less impact on new car sales. In a separate snap poll we conducted to consumers, more than two fifths (42%) of those interested in buying a new car will not delay plans to buy their new vehicle.”
