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Confusion leads to decline in UK car market

Date: 18 April 2018   |   Author: Rachel Boagey

Figures released by the Society of Motor Manufacturers and Traders (SMMT) have outlined a 15.7% decrease in the UK new car market compared with March 2017, leading many industry experts to express fears that the reason for the decline is continued economic and political uncertainty. 

The confusion over air quality plans has undoubtedly continued to affect confidence, and resulted in declines across all sales types. Demand from business, fleet and private buyers all fell in March, down 14.3, 15 and 16.5% respectively. Continuing the recent trend, diesel registrations declined in March,
down 37.2%. 

Ashley Barnett, head of consultancy at Lex Autolease, said, "Political, economic and regulatory factors are playing an important role and, combined with the recent increase in interest rates and another potential rise in May, consumers and fleets are naturally more hesitant when it comes to big-ticket purchases."

With no tax changes announced in the Spring Statement, the continued freeze on fuel duty was seen as good news in the industry. However, Barnett says, there is still confusion with no fourth-year BIK tables known, and the new WLTP emissions testing and the introduction of Clean Air Zones. "These factors are heavily influencing vehicle choice and a lack of understanding can result in the wrong decision," he said. "Greater clarity is essential and it's important that government tax policy and the green agenda complement each other in working towards the common goal of reducing NOX and CO2 emissions."

The decline in demand for diesel cars continues to be of concern and the latest tax changes announced by the government do nothing to encourage consumers to exchange their older diesel vehicles for new lower--emission models. The results highlighted a continued decline in diesel demand, which was down almost 40%  year-on-year. 

SMMT chief executive Mike Hawes said, "March's decline is not unexpected, given the huge surge in registrations in the same month last year. Despite this, the market itself is relatively high, with the underlying factors in terms of consumer choice, finance availability and cost of ownership all highly competitive. Consumer and business confidence, however, has taken a knock in recent months and a thriving new car market is essential to the overall health of our economy. 

"This means creating the right economic conditions for all types of consumers to have the confidence to buy new vehicles. All technologies, regardless of fuel type, have a role to play in helping improve air quality while meeting our climate change targets, so government must do more to encourage consumers to buy new vehicles rather than hang onto their older, more polluting vehicles."

Paul Holland, chief operating officer at Fleetcor, said, "Government policy centred on reducing CO2 and diesel use is certainly having an impact and shaping people's purchasing decisions when it comes to diesel vehicles - as highlighted in the latest drop in demand. But we're also seeing confusion in the market regarding diesel alternatives.

"Although there are many alternatives on the horizon - including EV and hydrogen- powered vehicles - the technology and infrastructure to make these economically viable has still not been fully realized."

He continued, "As a result, there is a trend among buyers to hold off on buying new vehicles until the alternative-fuel landscape becomes clearer. However, there can be an environmental impact to this mentality too, with consumers and organisations holding on to inefficient and outdated vehicles that don't take full advantage of new engine technology. To avoid this, the industry and government need to work together to provide more information and support to vehicle buyers - helping them to make more informed purchasing decisions."

Amid these concerns, industry experts are keen to highlight that it's still the fourth-biggest March ever for the sector, despite it being the 12th month in a row when sales are down. There was also the fact that March 2017 was the biggest month ever for new car registrations, as buyers hurried to purchase cars before new VED rates came into force in April 2017. 

Registrations for plug-in and hybrid vehicles continued to rise, albeit modestly, up 5.7%, with demand for plug-ins driving growth, up 18.2% for the month. Registrations of petrol cars were essentially stable, rising 0.5%.