Fifth consecutive month of decline in car sales

New car sales dropped 9% in July according to the latest figures from the SMMT, hitting just 112,162 cars sold in what was the fifth consecutive month of decline.

The ongoing global supply chain issues, particularly around semiconductors continue to bedevil the market, along with COVID-19-related issues in China plus the war in Ukraine.
Despite the overall decline, battery electric vehicle (BEV) sales were 9.9%, making up 12,243 of the monthly total, which represented 10.9% of market share for the month. Hybrid electric vehicle (HEV) sales dropped 6.7% to take 12.2% of the market. Plug-in hybrids (PHEVs) fell 34%, reducing their market share to 5.8%.

Commenting on the figures, SMMT Chief Executive Mike Hawes said: “The automotive sector has had another tough month and is drawing on its fundamental resilience during a third consecutive challenging year as the squeeze on supply bedevils deliveries. While order books are strong, we need a healthy market to ensure the sector delivers the carbon savings government ambitions demand. The next Prime Minister must create the conditions for economic growth, restore consumer confidence and support the transition to zero emission mobility.”

According to NFDA Chief Executive Sue Robinson, the results for the month were within expectations for the time of year: “July is a typically quiet month in the motor retail sector, and this is reflected in the number of new vehicles being registered. The demand for EVs continues to rise due to a combination of new and exciting models on offer, the increasing cost of petrol and diesel and growing expertise, thanks to schemes like the NFDA’s electric vehicle approved (EVA), amongst retailers”

An NFDA poll of franchised dealers conducted this week indicated that a range of factors were affecting consumer demand for electric vehicles, 80% of members indicated that an increase in the price of petrol and diesel had a strong impact on consumer demand for EV. Members also raised new EV models and greater EV government support as key drivers to demand.

Sue added: “Motor retailers are now seeing softening in demand driven by the increasing cost of living, with over 60% of respondents to NFDA’s poll believing that this ongoing crisis is having a severe impact on their business. When polled 73% of our members are dissatisfied with the government’s support towards EV.”

James Fairclough, CEO of AA Cars, observed: “The steadily improving sales of EVs are a rare crumb of comfort in a mostly grim set of sales data, and the second half of the year is off to a weak start. However, the overall slowdown in sales does come amid some more positive signs of recovery in the supply of new cars for sale.

“Separate SMMT data published last week showed that the number of vehicles rolling off UK production lines has now increased for two months in a row.

“While global car production is still below par, improving supply will be very welcome among the many dealers who struggled to meet buyer demand for new cars in the first half of the year.As supply improves, attention is switching back to consumer demand – and how Britain’s slowing economy will affect people’s willingness to make big ticket purchases.

“With the cost of living crisis steadily reducing disposable incomes, the desire for better value has led many prospective buyers to focus on the second-hand market, and many dealers report that sales of used vehicles continue to outpace those of brand new models.

James added: “In the current fragile market, used cars have a clear advantage over their brand new rivals – availability. We’ve seen this first-hand on the AA Cars website, with many would-be buyers using our platform to shop for a used vehicle that’s available to drive away today.”

John Wilmot, CEO, car leasing comparison website LeaseLoco, said: “Consumers are grappling with high fuel costs and surging energy and food prices, and with the Bank of England hiking interest rates, millions of homeowners are facing much higher mortgage costs. The worry for the car industry won’t be that consumers might opt right now to postpone big ticket purchases like a new car, it’s how long for? Families are having to look much further down the road at what they’re potentially facing in terms of higher living costs.

“Energy bills are likely to rocket during the winter months. And while millions of mortgage payers on fixed rate deals haven’t seen their monthly payments rise just yet, many of those deals will end in the next 6-12 months.”

John concluded: “The new car market may need to batten down the hatches a little while longer, as there could be a perfect storm heading its way.”

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