Fleet and business new car registrations fail to lift-off

Fleet and business new car registrations showed little sign of recovery in July, but pent up demand from private motorists provided some good news for carmakers.

Registrations of new cars to fleet and business was up in the month, however, increasing 4.5% compared to July 2019, with 94,958 units sold, according to the new data released today by the Society of Motor Manufacturers and Traders (SMMT).

But it was private new car registrations, increasing by 20.4% compared to July 2019, which provided some real respite for the market.

In fact, UK new car registrations rose for the first time this year, by 11.3% in July, with some 174,887 new cars registered overall. However, they are still down by 41.9% or 598,054 units year-to-date.

The total number of new cars registered to fleet and business so fast this year is 45.3% down year-on-year, with 433,868 units registered in 2020, compared to 792091 in the same period last year.

Andrew Burn, UK head of automotive at KPMG, said: “We’re still a long way off pre-COVID-19 levels of sales.

“Car manufacturers and dealerships have their work cut out to recover in the post-Covid-19 climate. 

“The release of pent up demand is certainly helpful, but it’s likely to be reflective of consumers shying away from public transport, or perhaps that some are now in a better position to afford a car having saved during lockdown. 

"Whether this momentum can be maintained is yet to be seen. Indeed, there is a clear trend towards private purchases currently, while business and fleet sales remain depressed – no doubt due to corporate cost savings."

The SMMT’s full-year outlook is for a 30% decline in overall registrations, representing more than £20 billion of lost sales.

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.

SMMT chief executive Mike Hawes 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.”

There were 72,550 new company cars registered to fleet and business users in June, a 10-fold increase on the 7,347 company cars sold in the previous month of May. 

Jon Lawes, managing director of Hitachi Capital Vehicle Solutions, welcomed the improvement in overall sales figures

However, he said: "With an overall decrease of 41% for registrations year-to-date, there is a long way to go, but attractive offers for fleets and consumers alike will aid market recovery and continue to drive demand.

“At Hitachi Capital Vehicle Solutions, we saw a 5% increase on sales for used vans and cars in remarketing through auctions and car supermarkets in July, as our latest auction achieved a 26% increase in combined sales from the previous year."

He continued: “In the shorter term, the automotive sector will be keeping a close eye on consumer confidence for the remainder of the year which remains fragile with prevailing economic uncertainty."

Hawes also says that the market remains fragile, particularly in the face of possible future spikes and localised lockdowns as well as 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,” he said.

The SMMT data, however, does show the appetite for zero and ultra low emission cars remains stable, with plug-in hybrids and battery electric vehicles (EVs) taking a  9% share of registrations for July, compared with 9.5% last month and up from 3.1% for 2019 overall.

Lawes said: “It’s really encouraging to see demand for electric and hybrid vehicles continued to rise in July, with these vehicles now representing almost a quarter (22.6%) of new registrations year-to-date."  

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.

Michael Woodward, UK automotive lead at Deloitte, said: “Manufacturers and dealers alike will treat these results with caution.

“The conversion of latent demand, built up over the last four months is a key driver of July’s growth, but we may see a slower rate of sale return over the course of the year once this demand dissipates.

“Whilst consumer confidence is returning, albeit slowly, consumers remain concerned over the state of the economy and the job market. As a result, consumers may be more cautious over major purchases moving forward.

“However, significant discounting is likely over the coming months as manufacturers bring their factories back up to full capacity. This could help maintain higher level of sales, at least in the short-term.”

Commenting on the overall increase seen in new car registrations, David Borland, EY UK & Ireland automotive leader, added: “Following on from last week’s announcement from SMMT that manufacturing output fell 48% in June, this is a much needed positive step for sales, but it remains to be seen if this trend continues with the fragile sales recovery and the industry still facing significant challenges as a result of Covid-19.

“With significant job losses already announced over recent weeks, it is likely that there are more to come as the industry realigns to a lower consumer demand and new working practices.

“With the ongoing pandemic and resurgence in localised areas, manufacturers, suppliers and dealers need to continue to manage the uncertainty, embrace technological change, attract investment, preserve as many jobs as possible and protect the future of the UK automotive industry.”