UK new car market growth shows no signs of slowing down

Commenting on the latest car registration figures from the Society of Motor Manufacturers and Traders, which show a 9.4% increase to 72,163 units compared with August 2013, David Raistrick, UK automotive leader at Deloitte said:

“The UK new car market is enjoying its 30th consecutive month of comparative growth, supported by historically low finance offers available to consumers as the Bank of England’s base rate remains at 0.5%. As we approach the second major registration month of the year, the automotive retail sector is anticipating a further bumper month of new car sales as the continuing growth trend shows no immediate sign of coming to an end.

“It is unlikely that manufacturers will be moving their focus away from the UK market just yet, as growth being achieved in the other major European markets is still well behind that of the UK. With the possibility of deflation looming in the Eurozone, this could potentially lead to the recovery in some European markets being slowed further, as consumers delay making purchases in the expectation of price reductions. This would suggest that we will continue to see production being directed to the UK where consumers are showing confidence to enter the market.

“Aside from a potential interest rate rise, the biggest challenge facing the automotive retail sector will be the impact of the increasing numbers of nearly new used vehicles returning to the market. This could detrimentally affect residual values with the knock on effect that the used vehicle purchase becomes a more competitive proposition – bringing an element of balance back to the industry. New cars remain exceptionally good value as a result of manufacturer incentives and the historically low finance rates.

“As a final note, it is interesting that diesel sales continue to grow in the UK at a much greater rate than petrol. Whilst this would not be a surprise if the growth in sales was being driven by business users, the private driver continues to be converted despite the fact that petrol engines are becoming much more efficient.”