Two years of growth for new car market

The UK new car market rose by 2.5% in July, delivering two years of consecutive growth, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).

With 147,517 new cars reaching the road, it was the best performance for July since 2020, when a re-opening of dealerships following four months of lockdown saw a surge in deliveries to fulfil pent-up demand.

As has been the pattern for the year, July’s growth was sustained entirely by the fleet sector, which recorded a 13.0% increase in registrations to achieve a 62.0% market share. Private demand continued to diminish, falling by -11.1% to account for 36.2% of deliveries in the month, although the growing popularity of salary sacrifice purchasing will contribute to this decline.

Electrified vehicle demand outpaced the overall market, accounting for four in 10 (42.0%) new cars registered in the month. Hybrid electric vehicle (HEV) uptake increased by 31.4% to achieve a 14.5% market share, while plug-in hybrids (PHEV) grew 12.4% to take 8.9% of registrations. Battery electric vehicle (BEV) volumes, meanwhile, were up 18.8%, resulting in an overall market share of 18.5%.

While the private share of the BEV market continues to fall – 17.2% were private buyers, compared with 20.3% last year – private BEV volumes did increase by a marginal 0.9%. Overall, BEVs account for 16.8% of the new car market, year to date.

With zero emission vehicles mandated to comprise a minimum 22% of each brand’s new car registrations over the full year, the SMMT noted that pace of transition needs to increase significantly.

The latest industry outlook, however, suggests that such a surge is looking increasingly unlikely given the current market conditions. While the outlook anticipates overall market growth in 2024, expectations have been revised downwards since April, with 1.968 million new car registrations now forecast by the end of the year. The anticipated BEV share of the market has also been revised downwards to 18.5% from the 19.8% expected in April.

The SMMT noted that last week’s interest rate cut was already ‘priced in’ to the latest outlook but further cuts would be welcome, helping reduce the costs of finance and making new car purchases more accessible to more consumers.

“Weakening private retail demand, however, particularly for EVs and despite generous manufacturer discounts, is the over-riding concern. More people than ever are buying and driving EVs, but we still need the pace of change to quicken, else the UK’s climate change ambitions are threatened and manufacturers’ ability to hit regulated EV targets are at risk.

“Achieving market transition at the pace demanded requires greater support for consumers and, with the all-important new numberplate month of September beckoning, action on incentives and infrastructure is needed now.”

“The bright spot is a strong consumer move to low emission cars, which so far this year have accounted for almost half of all new car sales, up from around just one in ten in 2019.

“Manufacturers are also working hard to tempt buyers with enticing offers, as shown by a 20% rise in new car advert views on our platform in July. That offers some optimism as we approach the key plate change month of September.”

“Fleet purchases continue to drive growth in the new car sector as companies take advantage of the stabilising economy to upgrade their vehicles.

“While private sales have taken a dip in recent months, there are encouraging signs on the horizon. The economic landscape is gradually improving, with inflation now stable at 2% and the boost from the Bank of England’s recent interest rate cut. As these positive changes begin to impact personal finances, we anticipate more private buyers entering the market, leading to more balanced growth across all sectors.

“The automotive industry is poised for an exciting year ahead, having now reached the significant milestone of 24 months of uninterrupted growth. We expect continued strong performance in fleet sales, complemented by a likely uptick in private and business purchases. 

“The increasing availability and growing popularity of electric and hybrid vehicles are also set to drive interest across all buyer categories, reflecting the ongoing shift towards more sustainable transport.

“For those who are still cautious about their finances but in need of a vehicle, the used car market remains an attractive option. It offers lower upfront costs and an extensive variety of makes and models, ensuring there’s a suitable choice for every need and budget. This sector provides an excellent alternative for buyers looking to balance quality with affordability in the current economic climate.”