Car industry breathes sigh of relief as UK sales bounce back in July

AFTER A catastrophic first half of the year due to the coronavirus lockdown, UK car sales in July were up 11.3% on the same month in 2019, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).

It is the first time in 2020 that the number of car registrations showed a monthly year-on-year increase. In total,174,887 new cars were registered in July, which was the first full month of trading since February. Showrooms in England were allowed to open on June 1 but trading didn’t resume until June 22 in Wales and June 29 in Scotland.

Despite the good news, the SMMT was quick to point out that new car registrations have fallen 41.9% for the year as a whole, and predicts that 2020 will represent a 30% decline in registrations compared to 2019, representing a loss of £20bn in sales.

The largest growth in July came from private buyers. A number of incentives from manufacturers is likely to have had an effect on the increase — eight out of 10 manufacturers are reportedly offering enticing finance and flexible payment deals in order to allay customers’ financial uncertainty. Schemes like this are likely to become even more important as the year goes on, with the furlough scheme winding down before finally ending in October.

The SMMT also noted that 13,000 jobs across the UK’s automotive industry have been lost in retail manufacturing as a direct result of the pandemic. British marques including McLaren and Bentley both cut large numbers of staff during lockdown, and DHL announced it would remove 2,200 jobs from its Jaguar Land Rover (JLR) contract. DHL delivers vehicle parts to specific sections of the JLR assembly lines “just in time” to be fixed to new cars as they are built.

The SMMT predicted that further job losses will occur due to other large challenges facing the sector. At the beginning of June, Nissan’s boss reignited fears regarding the future of the brand’s Sunderland plant, saying that operations at the factory would be “unsustainable” if the UK doesn’t secure a favourable trade deal after Brexit.

There was continued good news in July for those producing electrified cars, however. The increasing popularity of pure-electric models continued resulted in an increase of 259.4% compared to last year, while sales of plug-in hybrids (PHEVs) more than tripled, up 320.3%.

After a couple of months in April and May where unlikely cars (including the Tesla Model 3 and the Jaguar I-Pace) found themselves towards the top of the bestseller lists, more predictable models returned to the top 10 in July.  The Vauxhall Corsa was the month’s most popular car, followed closely by the Ford Fiesta and Ford Focus. The three models, albeit in a different order (Fiesta, then Focus, then Corsa), are the three bestselling cars so far this year.

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.”

James Fairclough, CEO of AA Cars, expressed his optimism: “This significant rebound in new car sales will deliver vital optimism into the UK car industry. After months of falling sales, this uptick suggests two important trends in consumer attitudes. Firstly that there was pent-up demand during lockdown, and drivers are now acting on their desire or need for a new car.”

Rachael Prasher, Managing Director of What Car?, said that there were indications that the resurgence in buying behaviour would continue in the coming months: “While the outlook remains incredibly uncertain, our independent polling of more than 6400 in-market buyers in June found one-in-five were looking to purchase a new vehicle in the next four weeks, another 26% said they were aiming to purchase in the next three months.

“Hopefully we will continue to see registrations rise in the coming months, and particularly for the crucial 70-plate change in September.”

Alex Buttle, director of comparison site Motorway.co.uk, said that, despite the uptick in sales, the industry still needed support from the government: “For now, the sector deserves to breathe a collective sigh of relief that disastrous numbers are in the past, but the hard work starts now and the industry must continue to lean on the Government for the specific support it needs.

“The Prime Minister should also take note of strong growth in electric car sales with new full electric (non-hybrid) registrations over 8,000 in July, which compares favourably with January (4,054) and February (2,508) numbers, pre-Covid.

“If there was ever a time for Boris to show more support for the electric switchover, and better incentivise people to switch to electric, it’s now. With buying confidence low, many consumers need more reasons beyond environmental ones to buy a new greener vehicle at the moment.”

Karen Hilton, chief commercial officer at heycar, said that there could be an increase in online buying behaviour: “As has been witnessed in every other part of life, the rapid increase in digital first activity has spread into car buying – and offers massive opportunities for dealers looking to continue this road to recovery.

“Online research we commissioned with YouGov revealed that almost one in 10 of the British population who own a car are now more likely to buy a car online than before the pandemic, with over one in five admitting they’d buy a car online without ever seeing it in person.

“This adoption of a full online research and preparation phase for car buyers would never have accelerated so quickly had it not been for the pandemic. However, it’s behaviour that’s here to stay and dealers need to respond to grow their sales again.”

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