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Uncertainty remains despite growth in new car registrations

Date: 15 May 2018   |   Author: Sean Keywood

Analysts have reacted to a long-awaited upswing in demand for new cars with caution. Sean Keywood reports.

The number of new cars registered in the UK increased by 10.4% year on year in April - the first rise in sales seen in more than 12 months. However, the Society of Motor Manufacturers and Traders (SMMT) has played down the rise, pointing out that sales in April 2017 were hit by changes to vehicle excise duty (VED).

The SMMT also said demand was affected by the timing of Easter, which meant two additional selling days this April, and adverse weather in March, which pushed some deliveries into April.

Before last month, the last time an increase in registrations had been recorded was in March 2017.

Demand for diesel cars continued to fall steeply year on year, down 24.9%, but this was more than compensated for by the demand for petrol cars, which grew by 38.5%, and for plug-in and hybrid electric cars, up 49.3%, although the latter still accounted for only 5.6% of the market.

The diesel decline did slow compared to the previous month, when there was a 37.2% fall.

The overall rise in the market was mostly driven by private buyers, to whom registrations increased by 26.3% year  on year, whereas fleet demand rose by only 0.9%.

Business registrations - to firms with less than 25 vehicles - fell by 12.9%, but these make up a small share of the overall market.

For the year so far, registrations are down 8.8% compared with the same period in 2017.

The SMMT expects this decline to slow during the rest of the year, but has warned that political and economic uncertainty will continue to affect the market and further instability could cause additional disruption.

SMMT chief executive Mike Hawes said, "It's important not to look at one month in isolation and, given the major disruption to last April's market caused
by sweeping VED changes, this increase is not unexpected. 

"While the continuing growth in demand for plug-in and hybrid cars is positive news, the market share of these vehicles remains low and will do little to offset damaging declines elsewhere. 

"Consumers need certainty about future policies towards different fuel types, including diesel, and a compelling package of incentives to deliver long-term confidence in the newest technologies."

Reacting to the figures, Ashley Barnett, head of consulting at Lex Autolease, agreed that last April's low sales affected how the data should be viewed, but offered an alternative perspective based on fleet renewal schedules.

He said, "It's unsurprising to see new car registrations for April rebound year on  year, given the VED changes in 2017 which saw more deliveries brought forward to March. Looking at the year-to-date figures however, the market is down - but this is not necessarily the best indicator of how the new vehicle market is performing.

"The average replacement cycle for most UK company car fleets is four years. If we compare the first quarter of 2018 with the same period in 2014 and 2010, there is in fact a slight increase over time - 17% between 2010 and 2018 and 4% increase between 2014 and 2018."

According to Barnett, a greater concern is that in order to meet government targets around emissions, there needs to be a more marked increase in registrations, so that older, more polluting vehicles are replaced with new, cleaner technology. 

He said, "The Budget is now not taking place until the autumn, which means the industry does not yet know the benefit in kind tax rates for what will be the fourth year of many fleets' four-year replacement cycle. The lack of this key information makes it harder for fleets and drivers to plan for the future. As a result, many consumers and fleets are holding off from placing orders. 

"In some instances, drivers are opting out of new company cars to take older, less environmentally friendly vehicles."

Simon Benson of AA Cars was more positive about the overall picture. He said, "After 12 consecutive months of decline in new car registrations, it appears that the SMMT figures could be the light at the end of the tunnel for the industry.

"It's likely that some deliveries of new cars will have been pushed into April, due to adverse weather through March, but this should not dampen spirits over what seems to be improvements in the market."



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