Market Insight: Long, hard road ahead of UK car sector

AUSTRALIA’S deep relationship with Britain has seen us keep a close eye on how the UK is faring during the coronavirus pandemic and how it is responding to a crisis which is playing out on such a massive scale.

As the death toll passed 34,000 last week, and positive cases blew out beyond 243,000, prime minister Boris Johnson began easing the nation out of its two-month lockdown and copping criticism from a variety of sectors, including automotive retailing, for not providing clear guidance on whether dealerships could reopen as part of the first attempts to rekindle a frozen economy.

Industry bodies, including the Society of Motor Manufacturers and Traders (SMMT) and National Franchised Dealers Association (NFDA), subsequently received clarification from the British government that bricks-and-mortar vehicle showrooms must remain closed to the public “pending further developments” – read: until at least June 1 – but that dealers are entitled to run a ‘click and collect’ style of service at their retail outlet for vehicles purchased remotely.

So long as customers do not enter the actual showroom, and dealers follow strict social distancing and hygiene protocols, buyers can visit the premises to collect purchased vehicles. The paperwork is expected to be completed, and the handover made, on the forecourt or in the parking area using an appointment system.

Any way you look at it, the UK has a long, hard road ahead of it and Australians can be thankful we are in such a better position from which to now recover – in virtually every aspect of the crisis, including car sales.

The UK’s new-vehicle market is a juggernaut compared to Australia’s, selling 2.677 million new light vehicles last year (passenger cars, SUVs and light commercials) compared to our equivalent 1.025m.

But like every country that went into full lockdown as a result of the COVID-19 pandemic, Britain’s new-vehicle showrooms joined all other retail businesses deemed ‘non-essential’ and closed down during March while buyers remained housebound. Workshops remained open for essential services.

Sales data published by the SMMT shows just how big an impact the lockdown had on the UK new-car market in April, with 4321 new registrations representing an unprecedented 97.3 per cent fall – equivalent to 156,743 fewer cars – compared to the corresponding month last year.

These figures are in line with other markets across Europe – Italy fell 97.5 per cent, and France 88.8 per cent, for example – and most of the vehicles were delivered to key workers and frontline public services and companies. 

SMMT chief executive Mike Hawes described the result as “the market’s worst performance in living memory” and one that was “hardly surprising”.

“These figures, however, still make for exceptionally grim reading, not least for the hundreds of thousands of people whose livelihoods depend on the sector,” he said.

“A strong new-car market supports a healthy economy and as Britain starts to plan for recovery, we need car retail to be in the vanguard. Safely restarting this most critical sector and revitalising what will, inevitably, be subdued demand will be key to unlocking manufacturing and accelerating the UK’s economic regeneration.”

Fleet orders represented by vast majority – 71.5 per cent – of the tally, equivalent to 3090 units, while private buyers registered just 871 cars – a year-on-year fall of 98.7 per cent.

SMMT reports that the distortion was reflected across all segments and fuel types, with the numbers of new petrol- and diesel-powered cars joining UK roads plummeting 98.5 and 97.6 per cent respectively, while plug-in hybrid electric vehicles (PHEVs) declined 95.1 per cent and hybrids 99.3 per cent.

One anomaly was the full-electric vehicle sector, which saw a smaller percentage decrease of 9.7 per cent, reflecting the fact that some pre-ordered deliveries of the latest premium EVs were fulfilled.

The most notable of these was the Tesla Model 3, which recorded 658 sales and came out as the top-selling vehicle in the UK, while the Jaguar I-Pace was number two at 367.

In April last year, the top-selling vehicle was the Ford Fiesta on 5606 units.

In the British LCV sector, which is reported separately, total sales fell 86.2 per cent last month, with 3387 vans, pick-ups and light trucks registered, most of which were heading to sectors key to pandemic response.

The SMMT said these included fleets for the NHS, emergency services, pharmaceutical, food distribution and home delivery services, “as the nation grew more reliant on these key businesses”.

The top-selling model was the Mercedes-Benz Sprinter with 814 units – and the overall result, which was 21,217 fewer LCVs than recorded in the same month last year, prompted Mr Hawes to note that “these figures, while not surprising, are still shocking” and highlight the urgent need to restore business confidence and ramp up retail operations.

For the year to date, the UK new-car market is down 43.4 per cent to 487,878 units.

The SMMT now expects the market to drop to 1.68 million units this year, the lowest point since 1992 (1.59m) and below the levels seen during the global financial crisis and some 27 per cent lower than the 2.31 million cars and SUVs registered last year (not including LCVs).

The ongoing shift towards battery electric vehicles is perhaps the only positive note at this point, with sales expected to double to 77,300 units as new model introductions bolster the segment.

With LCVs, the market is down 44.0 per cent to 71,294 units and the SMMT’s revised outlook expects a 28 per cent decline for the full year, to 263,000 registrations.