Why July’s boost in sales doesn’t guarantee an imminent recovery
The number of new cars registered by UK buyers rose by 11.3% in July, according to the latest figures released by SMMT this week. The year’s first month of growth offers a reprieve for the industry as dealerships across the UK were able to open for their first full month of trading since lockdown began. However, as we are all too aware, it is far too early to draw long term conclusions.
July’s growth was driven by pent-up demand from consumers unable to renew their cars earlier in the year – and no doubt helped by some very attractive industry incentives. And, while these figures provide a much-needed boost, they must be viewed cautiously. Showrooms have only just reopened nationwide and there is still much uncertainty about the future with the threat of further spikes, localised lockdowns and the sadly inevitable job losses across the economy.
SMMT’s newly revised full year outlook suggests a -30.6% market decline – equivalent to some £20bn in lost sales – so we are not out of the woods. The next few weeks will be a crucial indicator as to whether the sector really is on the road to recovery, and we are unlikely to get a clear picture of demand until the last quarter.
Of course, the last quarter also brings with it the end of the transition period as we leave the EU. Whilst we know we are leaving the single market and customs union – with all the trading complexities that will bring – we still do not know our future terms of trade and, critically, whether we will be subject to the imposition of tariffs on automotive goods exported and imported.
The sector’s long-term success is therefore dependent on securing free trade agreements, not just with the EU although it is by far the most important, but also with other key trading partners.
SMMT therefore welcomes the news this week that trade talks between the Secretary of State for International Trade, Liz Truss and her Japanese counterpart Toshimitsu Motegi, are progressing at a pace and we are hopeful that an agreed FTA in principle that delivers on automotive priorities will be announced imminently.
The top priority, however, must remain to secure a comprehensive FTA with the EU, including zero tariffs and a new regulatory framework from day one. In the meantime all businesses must prepare for the new customs arrangements and, starting this month, SMMT will be running a series of webinars focusing on preparing businesses for the end of the transition period. The first in the series will focus on the issue of customs and will take place on Tuesday 11 August 10:00am. You can register here.