New Car Market Update July 2020

There were some green shoots of recovery in the new car market in June as the Government imposed lockdown lifted for dealerships in England, though not all were open throughout June as new social distancing measures needed implementing. Whereas in Scotland, Wales and Northern Ireland closures were still in place.

This resulted in 145,377 new car registrations in June according to figures published by the Society of Motor Manufacturers and Traders (SMMT), down 34.9% compared to the same month last year. This equates to the market being almost 616,000 units, or 48.5% behind the same period last year.

The private retail sector saw a stronger recovery than fleet or business, with registrations 19.2% lower in June, with pre-lockdown orders now being fulfilled more readily. While fleet registrations contracted by 45.2% to 69,498 units.

Once again Alternative Fuel Vehicles (AFVs) outperformed traditional fuel types, with a 73.3% increase on June last year, which included a massive 261.8% increase in Battery Electric Vehicles. Petrol fell almost 40%, while diesel continues its rapid decline with a fall of 59.3%, now languishing in third place behind petrol and AFVs in total registration terms. The year to date totals of petrol and diesel registrations are significantly behind last year, as shown in the chart below.

June’s figures show limited improvement on the previous two months registrations, but the uneven nature of the reopening of dealerships throughout the United Kingdom makes it difficult to measure the extent of any pent-up demand and consumer confidence. Consumers are still uncertain about their financial situation and what the future holds, so may be reticent to commit to long term and large financial commitments. There is also the possibility of potential customers switching from buying new to used cars to save money. This could be good news for used car residual values moving forward, yet add yet more woes to the new car market.

The same can be said for the fleet sector, as businesses come to terms with the economic shockwave of the pandemic, and look to either cut or defer spending in the near term. This will have a negative impact on registrations.

On the positive side, the Government lockdown continues to ease with more businesses allowed to open and social distancing reductions potentially improving the economic climate. The Chancellor has also brought in a number of extra spending plans to attempt to stimulate the economy and avoid a long and deep recession.