Reflections on the UK new car market, in decline, again.

08-May-2019

It is very hard to avoid pointing a finger at ‘Brexit’ for the current position in the UK Motor Industry, reports Iain Robertson, as new vehicle registrations are reduced markedly, despite frantic manufacturer platings and dealer ‘stuffings’.

Although it seems like an age ago, 30 years in fact, when motoring headlines broke the news that disused RAF bases were stockholding vast quantities of over-produced motor vehicles, a number of factors have come into play since. Firstly, those former service bases are now rented-out permanently to vehicle management firms. Secondly, the huge stocks have grown. Thirdly, we are not producing anything near the numbers of vehicles that we did three decades ago. Yet, manufacturers are still over-producing (mainly to keep their expensive lines in moderate flow) and, despite advice to the contrary, they continue to self-register and make their dealers plate new stocks on-going, which demands ever more storage space locally.

However, with a reported 4.1% drop in UK new vehicle registrations in April 2019, the month saw 161,064 units registered, the second lowest April volume since 2012. More telling, registrations by private motorists fell by -10.3%, after a rise of more than 26% in April 2018. Fleet demand, meanwhile, remained stable, actually growing by 2.9%, with businesses registering 2,498 more cars than in April 2018, much of which is due to cyclical replacement policies.

Declines were recorded across most vehicle segments, with registrations of popular supermini and small family cars falling most significantly, down -14.1% and -10.6%, which must be exceedingly worrying for some players dependent on those segments. Demand for lower volume luxury saloons and sports cars rose, while the dual-purpose segment also grew, by +18.4% to 40,580 units. These vehicles, which include SUVs and crossovers, are now the third most popular body type, with registrations tripling since 2012. Yet, some European market analysts are reporting that the SUV craze is plateauing, which may introduce a cause for concern in some quarters.

Intriguingly, against the might of government-promoted anti-diesel campaigning, registrations in that segment fell again but the pace of decline has slowed significantly; it was down -9.4%. However, petrol demand also dropped, by an amazing -3.0%. Overall, alternatively fuelled vehicle (AFV) registrations grew by 12.7%, with 10,254 leaving showrooms according to the SMMT’s figures. Petrol electric hybrids remained the most popular choice, up 31.1% to 6,810 units, which underscores both BMW’s and Mercedes-Benz’s commitment to the market’s future, while also underscoring a consumer desire to dabble in ‘eco-motoring’ but not to rush to full EV acquisitions. Battery electric cars also recorded a strong uplift, from 929 to 1,517 units, which still only represents 0.9% of the market, despite rumours to the contrary. Yet, at this stage, it is a manageable proposition, which will only improve, once unit list prices reduce and a recharging infrastructure builds to more acceptable levels.

Most telling of the April statistics is that zero emission-capable plug-in hybrids experienced a significant downturn, reportedly down -34.4% in April and -20.4% year-to-date. Needless to say, the SMMT uses this as evidence of the consequences of removing upfront purchase incentives prematurely (inc. tax incentives and grants), before the market was truly ready. It is a view that is largely true.

Meanwhile, manufacturers are investing heavily to bring ultra-low and zero emission cars to market, in the wake of London’s mayor launching the broader ULEZ area, with some 40 plug-in models now available in showrooms and over 20 more expected to arrive over the course of this year. However, if this still emerging sector is to reach meaningful levels, measures and incentives that build business and consumer confidence will be vital, according to the SMMT.

Looking at the UK’s Top Ten in April 2019 and the equivalent Year to Date figures make fascinating viewing:

 

APRIL 2019

 

YEAR-TO-DATE

 

1

Ford Fiesta

5,606

Ford Fiesta

29,080

2

Ford Focus

4,565

VW Golf

21,365

3

VW Golf

3,953

Ford Focus

21,233

4

Nissan Qashqai

3,791

Vauxhall Corsa

20,375

5

MB A-Class

3,584

MB A-Class

20,216

6

Ford Kuga

3,455

Nissan Qashqai

20,211

7

VW Polo

3,022

VW Polo

16,111

8

VW Tiguan

2,822

Ford Kuga

14,260

9

Vauxhall Corsa

2,728

Kia Sportage

13,329

10

Hyundai Tucson

2,702

BMW Mini

13,280

 

While Fiesta has been a perennial top performer, 25 years ago it was the one-size-up Ford Escort that ruled pole position, followed by Mondeo, which serves to highlight the downshift that has occurred in the new car scene. In that same year, the Golf hovered around the bottom of the Top Ten. Interestingly, Nissan’s UK-built Qashqai is the UK’s best-selling SUV but Kuga, Tiguan, Sportage and Tucson were unknown in the UK market all those years ago. The march of Merc’s A-Class is interesting and not surprising but the firm’s products never figured in the UK Top Ten a quarter of a century ago.

The final issue relates to the division between business and private registrations, which remains unresolved by the SMMT, which does not take into account that around 90% of all private registrations are to one-man-band, or small businesses that proliferate in the UK, claim for their vehicles against tax but are seldom treated like businesses. Were vehicle suppliers more truthful when checking boxes on the V55 registration documents, a truer figure would emerge.

However, until our economic, environmental and political positions are resolved, these figures will continue to vacillate month-by-month. In some respects, the market will find its feet and car company marketing departments will avoid the ‘push-push’ stance that they have adopted since 2008. Until these issues are dealt with, the Motor Industry will be a continued trouble spot.

Motor Industry Snippets

Citroen fills 200 Surrey potholes

As mentioned above, ‘push-push’ marketing has led Citroen into working with a quick roads repair specialist (Nu-Phalt Contracting) as a small contribution to repairing some of the UK’s fast-failing roads network. Needless to say, the exercise ties in with the recent introduction of the French company’s C5 Aircross model, which boasts super-compliant suspension that can almost cope with potholes but does not eradicate the potential of damaging the car, should it fall into one. Naturally, despite only repairing 200 of the countless surface imperfections it managed to find on Surrey’s leafy lanes, Citroen left its mark on each of them. Perhaps somebody ought to inform them that completing the task might have been a better, if considerably costlier gesture!

Citroen dips its little toe into the pothole situation

Government advisors urge 2030 adoption date

As you may have heard on the grapevine, the government’s plans to end the sales of new petrol, or diesel cars by 2040 have come under fire. Fazed clearly by the recent canonisation of a dyslexic/OCD Swedish teenager, its advisors feel that 2030 is more appropriate. They support their claims with the expectation that EVs will reduce significantly in price (a factor that causes most potential customers to cling onto their resources, until they drop). Yet, they also state that at least 3,500 rapid-chargers adjacent to motorways and a slightly more realistic installation of 210,000 public chargers in towns and cities (which actually want people to use public transport systems instead and NOT to bring their vehicles into conurbations) will be required. It should be interesting to see how these demands are funded.

Ford invests $500m in US EV specialist Rivian

Were I Rivian, I would be both delighted and terrified that Ford wanted to invest in my car company. Guaranteed, there will be safeguards from Ford’s viewpoint, after all, its history is littered with failed partnerships and, to be frank, mismanagement at the highest levels. While such a figure may seem like a king’s ransom to most of us, despite Ford’s current and parlous financial state, it is little more than the mid-life, redevelopment costs of a small car to the US giant. Ford suggests that its link to Rivian will help it gain a place more speedily in the race to participate in the EV market worldwide. It is a lot of money by any reckoning but it can be swallowed-up most recklessly by some of Ford’s demands.

Vehicle lease extensions are false economy

An air of inevitability exists around the vehicle leasing sector. While it is unavoidable that a number of firms committed to contract hire arrangements will seek to extend their contracts, in light of political uncertainty, the lease companies, spotting that they are becoming over-exposed to risk, will pooh-pooh anything surrounding those premium-rated extensions. Using ‘kicking the can’ verbiage and expected ‘fear selling’, their arguments in favour of new rolling stock do hold some advantages to some clients. However, with residual values on trade-in stocks being in flux and taking into account cash richness (or lack of it) within some business outlets, extending contracts may be more than an emergency gesture. Our advice is to speak with your vehicle consultant and look deeper into the cost implications.