LCV market grows for the first time since January

The UK new light commercial vehicle (LCV) market saw its first month of growth since January, with a 7.1% increase in registrations, according to the latest figures released today by the Society of Motor Manufacturers and Traders (SMMT). In total, 27,701 new LCVs joined Britain’s roads.

Growth was particularly pronounced in medium-sized vans weighing greater than 2.0 to 2.5 tonnes, which saw an 12.0% increase in registrations, and pick-ups, where dealers recorded a 24.9% increase in sales. The only fall was in the light van (less than or equal to 2.0 tonnes) sector, where registrations dropped by -22.0%. Heavy vans made up the lion’s share of overall sales, with 17,566 registrations, an increase of 5.4%.

Meanwhile, there was a substantial 78.1% increase in 4×4 demand, but this class of vehicle represents a very small fraction of total LCV registrations.

The improvement comes against a backdrop of prolonged reduced demand, with overall LCV registrations down by -39.0% in the year to date. The latest SMMT Outlook estimates that around 270,000 LCVs will be registered by the end of the year, a drop of -26.3%.

Mike Hawes, SMMT chief executive, said, “With lockdown restrictions rolling back and businesses restarting operations, the van market is beginning to look more positive. Growth is likely to have been driven by pent up demand and the re-emergence of sectors such as construction.

“However, these green shoots of recovery could prove fragile given the uncertain economic situation. With new technology coming to the market and the need for operators to renew their fleets, maintaining overall business confidence will be crucial.”

New car registrations up 11.3% as pent up demand helps lift market

UK new car registrations rose for the first time this year, by 11.3% in July, according to figures published today by the Society of Motor Manufacturers and Traders (SMMT). Some 174,887 cars were registered in July 2020 as dealerships across the UK opened for their first full month of trading since February.2 This represents a significant improvement on the same month last year, when declining business and consumer confidence undermined the market.

Pent-up demand and special offers led to a reprieve for the sector, but overall registrations are still down by -41.9% or 598,054 units year-to-date. Despite the increase in July, SMMT’s full year outlook is for a -30% decline in registrations, representing more than £20bn of lost sales.

Private demand saw the most significant growth with a 20.4% increase in registrations, primarily a result of consumers finally being able to renew their cars after lockdown had forced them to delay. In addition, manufacturer incentives have helped attract customers to showrooms. Eight of the 10 major manufacturers provided attractive finance offers and flexible payment terms in a bid to head off consumer uncertainty3 – vital as the Coronavirus Job Retention Scheme phases out, potentially sparking redundancies across the economy and impacting confidence to invest in big ticket purchases.

Public appetite for zero and ultra low emission cars remains stable, with plug-in hybrids and battery electric vehicles taking a 9.0% share of registrations for July, compared with 9.5% last month and up from 3.1% for 2019 overall. Meanwhile, ‘supermini’ and lower medium sized (or small family) cars were once again the most popular segments, accounting for 59.1% of registrations. Dual Purpose cars comprised 25.9% of vehicles registered.

Business car registrations showed modest growth, with fleet purchases increasing by 5.2%. Even so, more than 13,000 jobs have now been lost by UK Automotive across retail and manufacturing as a result of the pandemic, with more likely to follow given the scale of the challenges facing the sector, including shifts in technology, Brexit uncertainty and a depressed market.

Mike Hawes, SMMT chief executive, said,“July’s figures are positive, with a boost from demand pent up from earlier in the year and some attractive offers meaning there are some very good deals to be had. We must be cautious, however, as showrooms have only just fully reopened nationwide and there is still much uncertainty about the future.

“By the end of September we should have a clearer picture of whether or not this is a long-term trend. Although this month’s figures provide hope, the market remains fragile in the face of possible future spikes and localised lockdowns as well as, sadly, probable job losses across the economy. The next few weeks will be crucial in showing whether or not we are on the road to recovery.”

Covid-19 sends van insurance premiums into reverse

Insurance premiums for van drivers have dropped an average of 2.3% in the last three months, according to the latest figures from data analytics company Consumer Intelligence. The average UK van insurance premium today stands at £1,065.

With many businesses hitting the pause button due to the coronavirus pandemic, the number of vans on the UK’s roads has dramatically fallen. This change in driving behaviour has resulted in fewer insurance claims, with insurers now passing on these savings to their customers.

Premiums were hovering around their all-time high in March before coronavirus took hold in the UK – with lockdown subsequently reducing the cost of van insurance.

But John Blevins, pricing manager at Consumer Intelligence, believes the situation could change again in the coming months.

Blevins says: “As motorists take back to the roads now lockdown has eased – with perhaps even more vehicles on the road than before with people avoiding public transport – claims numbers are likely to rise and so, too, will premiums,” he says.

Over the last year, younger van drivers have seen the biggest drop in premiums (14%), but insurance costs remain prohibitively high for the under-25s – at £3,347 for an annual policy. Average premiums for 25-49-year-olds and the over 50s have incurred increases over the same period, 3.8% and 2.9% respectively. Overall, average premiums have dropped 0.9% in the last 12 months.

Average premiums for drivers using their vehicle for business and those using their van as a car substitute are now broadly similar at £1,063 and £1,072, respectively.

Business users have seen their insurance premiums drop by 0.8% in the last 12 months. Similarly, those with a ‘social, domestic and pleasure’ (SDP) policy have witnessed a 1.2% decline over the same period.
“As businesses start to reopen and van traffic increases, we will watch with interest how this market moves forward,” says Blevins. “As always, claims frequencies and severity will drive premium movements.”

The worst six months since rationing ended

Production figures released this week by SMMT reaffirm the difficulties that all automotive businesses are facing as they try to restart while major markets attempt simultaneously to recover from a pandemic and tackle unprecedented sectoral challenges.

Whilst June marked an improvement on April and May (when only 5,511 cars were built), production still declined by -48.2%, with only 56,594 models rolling off production lines. Since January just over 380,000 cars have been built, a decline of -42.8% and, in monetary terms, a loss worth nearly £8bn.

Engine production also declined by -24.3% in June and -38.8% over the year. Commercial vehicles, however, fared better with production growing for the first time this year by 23.9% as new model uplift helped to reverse heavy losses in 2019. However, this has failed to offset the impact of COVID with half year CV output falling by -24.8%.

Recovery has been made more complicated due to the continued uncertainty over the UK’s future trading relations with the EU. New independent analysis suggests that without an FTA, and the industry trading on WTO 10% tariff terms, output could stay around the 800,000 mark to 2025, whereas, a zero tariff FTA would see car volumes recovering to pre-crisis levels of 1.2 million units within the next few years and all to play for thereafter.

SMMT also this week released results from a new member survey, which sought to assess where businesses are with preparations for Brexit. Perhaps unsurprisingly given ongoing uncertainties, the lack of clarity as to future trading conditions is severely hampering companies’ ability to prepare for the end of the transition. Nine out 10 companies (93.5%) cited this as a major problem, with six in 10 (61.3%) saying COVID-19 has diverted resources away from Brexit preparations. Meanwhile, more than seven out of 10 (77.4%) view securing a tariff and quota free FTA as crucial to their future success.

The long-term future of the industry – which has proved its inherent competitiveness and global excellence over the past decade – therefore depends on securing an FTA with the EU this year, as well as a long-term strategy that fully supports it.

More immediately, we are still dealing with the impact of coronavirus on day to day operations, not just in manufacturing but in retail and aftermarket too. Demand for MOTs, for instance, has been significantly affected and SMMT has been supporting the DVSA with its new campaign, launched today, to encourage motorists to beat the rush and get their test done this summer.

Although the six-month MOT extension provision ends on 1 August, deferred tests have created increased demand this Autumn, so it is important that owners are strongly encouraged to get their vehicle’s test done as soon as possible to avoid disappointment.

Finally, keep an eye out for a new series of SMMT webinars, starting in August, which will focus on preparing companies for the end of the transition period and new trade implications from 1 January.

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