Fleet and business new company car sales ‘driving recovery’

Fleet and business registrations grew more than twice as fast as private purchases in May, according to new figures from the Society of Motor Manufacturers and Traders (SMMT).

There were 82,872 new cars registered to fleet and business last month (May), a 1,027% increase on the 7,348 units registered in May 2020, when the country was in lockdown.

However, while the figures are encouraging, it was still a 21% decline on the 104,293 company cars registered in May 2019.

Year-to-date it was a similar picture, with 401,862 new company cars sold so far this year compared to 266,365 units in the first five months of 2020 – a 50% increase.

But, when compared to the same period in 2019, when 567,902 units were registered to fleet and business, these latest figures show a 29% decline.

With 156,737 units registered overall in May – an almost eightfold increase on the same month last year – it is also down (15%) on pre-pandemic May 2019, and 13% on the 10-year May average.

Uptake was in line with the most recent industry outlook, published in April, which sees the sector anticipating around 1.86 million registrations by the end of the year – with 723,845 achieved so far.

Mike Hawes, SMMT chief executive, said: “Increased business confidence is driving the recovery, something that needs to be maintained and translated in private consumer demand as the economy emerges from pandemic support measures.

“Demand for electrified vehicles is helping encourage people into showrooms, but for these technologies to surpass their fossil-fuelled equivalents, a long-term strategy for market transition and infrastructure investment is required.”

In terms of segments, dual purpose vehicles saw a small decline in market share in the month, down to 27%, leapfrogged by lower medium cars which rose to 28%. Superminis remained Britain’s most popular car choice, with a 31% share.           

Battery electric vehicle (BEV) market share declined from 12% a year ago to 8% in the past month, although the May 2020 performance was distorted by lockdowns when new cars could only be purchased through click and collect or delivery, giving rise to variable purchasing patterns.

Looking more broadly across 2021, plug-in vehicles now comprise 14% of new car registrations, up from 7% a year earlier, with the most rapid growth seen in plug-in hybrid (PHEV) derivatives.

Pure petrol and mild hybrid petrol cars so far account for 60% of registrations, while pure diesel and mild hybrid diesels took a 18% share year to date, compared to 65% and 22% last year.

Richard Peberdy, automotive lead at KPMG UK, said: "Despite some caution, there are signs that sales are ripe for recovery in the longer term. The average age of vehicles on our roads is at a record high, suggesting many drivers will be looking to switch soon, and inventory shortages in the used-vehicle market should push motorists towards new models.

"The picture is particularly encouraging for future plug-in sales, with an increasing supply of attractive electric and hybrid options for consumers to choose from. And we’re likely to see a further boost to the strong momentum behind electric and hybrid vehicle sales in comparison to diesel, a trend that the SMMT data continues to track."

Meryem Brassington, electrification propositions lead at Lex Autolease, believes that the rise in EV registrations shows the significant progress the industry is making along the Road to Zero. "This is particularly encouraging given the BEV supply chain challenges the industry is currently facing, and the recent changes to plug-in grants," she said.

Jon Lawes, managing director of Hitachi Capital Vehicle Solutions, also welcomed the increase in EV registrations. "The year-on-year 822.4% increase in battery electric and hybrid vehicle registrations reflects growing demand in an increasingly viable market as the transition to cleaner, greener vehicles continues to gather pace," he said.

"With Birmingham becoming the second UK city to implement a Clean Air Zone to address air pollution levels, EVs will increasingly be at the forefront of replacement decision making – reflected in the 368% growth we’ve seen in our EV Fleet over the past year."

However, Brassington believes the latest registration figures mask a worrying trend. "There were more than 376,000 fewer new car registrations in the five months to May than in the same period of 2017. That’s 376,000 cars on the road today that are older and less efficient," she explained. 

"If replacement cycles are extended further by businesses reconsidering their fleet mileage as Zoom meetings replace face-to-face, this could seriously offset the gains made by the growth in EV adoption.  

"As ever, the right infrastructure and fiscal incentives to drive EV adoption are crucial as we continue on the march towards net zero. Equally, it’s just as important to create the conditions for a strong second-hand market to help drivers across the affordability spectrum make the leap from older, traditionally-fuelled vehicles to used EVs."

Semiconductor shortage

Total registrations for 2021 sit at 296,448 fewer units, or 29% less, than the average recorded across January to May during the last decade, evidence of the scale of the recovery still needed given the impact of Covid on the market.     

However, manufacturers are also battling a shortage of semiconductors, which is extending lead times for new cars and vans.

Jamie Hamilton, automotive director and head of electric vehicles at Deloitte, explained: “The ongoing global shortage of semi-conductors means that there is little respite for the sector and disruption is expected to last at least through to the end of the year.

"Manufacturers have responded so far by employing a variety of tactics to minimise both near- and long-term damage. This includes shifting assembly to more in-demand products, bypassing the installation of some parts and modules until a later date, and securing alternate sources of semi-conductor supply.

“Some manufacturers are struggling to meet consumer demand and, in some cases, are significantly reducing production forecasts, cutting hours, and even idling factories.

“For dealerships, stock is visibly low for some and consumers themselves are also feeling the impact, waiting longer than usual for delivery of their new vehicles. As a result of delays, some consumers are now turning to the used car market, but stock is also an issue here so it is no surprise that we have seen the value of used cars grow significantly over the last month."