Growth – but is it as positive as it looks? - A weak new vehicle market, economic and political uncertainty continues to generate headwinds….

Growth – but is it as positive as it looks?

New car registrations for September grew by 1.3% year on year, posting their first month of growth since February 2019 and only the second month in the last 12 months. However, this increase in registrations was flattered by events in 2018: in September 2018, new car registrations fell significantly in comparison with 2017, posting a decline of -20.5% (source SMMT) on the previous year following the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).

Looking into the detail

In order to get a better reflection of what is taking place in the UK new passenger vehicle market, we have reviewed the third quarter of 2019 versus 2018. The third quarter of 2019 was -0.64% below the same period of 2018, representing a decline of some 3,800 vehicles (source SMMT). 

Looking beyond 2018 – which was affected by WLTP – the decline for the third quarter of 2019 versus that of 2017 was significant lower, down by -10.7% or approximately 71,500 vehicles less. The Real Driving Emissions (RDE), which was introduced on 1 September 2019, has had less of an impact than WLTP and many of the OEMs were better prepared for this regulatory change in emission standards. Quarterly new vehicle registrations indicate that market growth remains negative. However, it is still unclear how many vehicles were tactically registered in September 2019 versus the same month in 2018, although industry sources suggest that vehicle registrations for the last few days of the month were very busy.

Consumer confidence remains weak

Against a backdrop of persistent uncertainties – caused by Brexit, politics, and economic weakness – 

– the only certainty in the current climate appears to be the ongoing weakness in consumer confidence. Sentiment remains subdued and there are few signs of any significant short-term improvement.

The UK Consumer Confidence Index reached a level of -14 in August 2019 (source GfK) and although confidence showed a slight improvement in September 2019, there is no indication of any sustained upward trend.

There was good news for electric vehicles, with battery electric vehicles once again showing strong monthly annualised growth of 236.4% and increasing market share to 2.2%, representing some 7,700 vehicles and growth of 122.1% year to September 2019. Diesel vehicles continued to suffer, and diesel’s market share declined to 22.6% – this represents a dramatic fall since “Dieselgate” when diesel vehicles accounted for 48.9% of the market. (August 2015, Source SMMT)

New passenger car registrations, consumer confidence and fuel types

The dramatic decline YoY in September 2018 was due to the introduction of WLTP, relating this to September 2019, the growth was expected, but on the back of the prior years exceptionally low units. 

Consumers confidence still remains in and around the low levels of between -10 and -14 (Source GfK).  At present, there are no clear trends to indicate that consumer confidence is set to rebound. 

The purchase of diesel vehicles continues to decline as consumers move away from this fuel type, while battery electric vehicle registrations have risen strongly, although from a low level.  The inconvenience of EVs means that this fuel type has a small level of market share penetration, this level of penetration is only likely increase once the charging infrastructure is sufficient and price of EVs have fallen.

New passenger vehicle registrations

If you would like to discuss our thoughts on the UK automotive market, or how we may be able to assist you in these challenging times, please get in touch

owen.edwards@uk.gt.com