Diesel suffers most in declining sales

The decline in the volume of the UK’s new passenger car registrations continues, with the latest figures from the Society of Motor Manufacturers and Traders (SMMT) revealing a 12% drop in October 2017 compared to October 2016.

New car demand in the UK has now dropped for the seventh consecutive month and the 12.2% October decline represents the second biggest monthly drop of the year so far. Only 158,192 vehicles in total were registered, with diesel models suffering the most, while petrol saw a slight increase in sales and the expanding alternative fuel vehicle (AFV) segment saw continuing rapid growth.

Decline was seen across the different market sectors, with business and fleet demand down 26.8% and 13.0% respectively. Meanwhile, dealers reported 10.1% fewer private buyers taking delivery of new cars in the month.

This comes despite manufacturers launching a number of incentive schemes to entice drivers into trading in older and more polluting vehicles for new lower emission models. These were launched at the start of September but with the lag effect from order to registration, it was expected that October’s figures would more positively reflect the sales impact that the new deals have had.

Nevertheless, with fleet and business sales down more than private vehicles in the month, this could still highlight a slight impact of the manufacturer incentives. However, the decline in diesel sales and increase in AFV registrations is of course still largely a result of the ‘demonisation’ of diesel in recent months and the announcement of an extra charge on more polluting vehicles in London –although this doesn’t apply to vehicles running Euro 5 and upwards technology.

In the month, diesel sales were down by 29.9% compared to October 2016, while petrol saw a light increase of 2.7%. AFV demand grew by 36.9%, although this only represents an extra 2,223 sales and a market share of 5.2%. In contrast, diesel saw 26,539 fewer sales, with the share in the month falling below 40% for the second time in 2017. Overall, the market contracted by 21,976 units compared to October 2016 and this could again cause a decline in new car registrations Europe-wide when the next set of figures are published by the European Automobile Manufacturers Association (ACEA). In its September results publication, West Europe’s new car market was down 2.2% thanks to the 9.3% decline in the UK market during that month.

Year-to-date, the new car market is now 4.6% down on 2016 levels, with 2,224,603 units registered. This aligns with the SMMT’s latest sales forecast for 2017, published last week, with the market expected to end the year on 2.565 million sales, a 4.7% drop on last year. However, given the severity of the market contraction in recent months as well as the rise in interest rates announced on 2 November and the fact that the 2017 GDP forecast for the UK has been reduced following only modest growth in Q3, this forecast already seems rather bullish.

Mike Hawes, SMMT chief executive, said, ‘Declining business and consumer confidence is undoubtedly affecting demand in the new car market but this is being compounded by confusion over government policy on diesel. Consumers need urgent reassurance that the latest, low emission diesel cars on sale will not face any bans, charges or other restrictions, anywhere in the UK. We urge the government to use the forthcoming Autumn Budget (22 November) to restore stability to the market, encouraging the purchase of the latest low emission vehicles as fleet renewal is the fastest and most effective way of addressing air quality concerns.’

Meanwhile, the latest trade sales volumes data collated by Glass’s confirm that the used car market continues to perform better than the new car market. Since May, volumes have tracked slightly above those achieved in the same months in 2016 and the net effect is that the volume of used car transactions in the first nine months of 2017 was 1.7% higher than in the same period in 2016, compared to the 3.9% decline in new car demand over the first three quarters. However, this growth is outpaced by the rise in stock levels as a result of the boom in new car registrations in recent years and so could naturally apply some downward pressure on residual values.