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Industry urges support for clean engine technology

Date: 23 January 2019   |   Author: Simon Harris

More backing is needed to help arrest falling new car sales, as Simon Harris reports a sombre outlook in 2019 for some brands.

Motor industry leaders are calling on the government to offer support for the latest engine technologies as the car market declined in 2018, with diesel sales suffering a fall of almost 30%.

The SMMT claims environmental objectives are being put at risk, with alternative fuel vehicle registrations, which include hybrids, plug-in hybrids and pure electric vehicles, rising far more slowly than the rate of diesel's decline.

At the same time, some car manufacturers have announced job losses or restructuring plans for 2019 in an attempt to counter tough market conditions and prolonged economic uncertainty.

No one expected 2018 to be a stellar year for new car registrations, and there were good reasons to predict a decline.

The requirement that the new WLTP for fuel consumption applied to all new cars on sale by September 2018 created bottlenecks across European test facilities, and caused some cars to be temporarily withdrawn from sale.

In the UK, continued uncertainty over its future trading relationship with the EU has also resulted in delayed procurement decisions for vehicles.

And while vehicle manufacturers are preparing contingency plans should the UK leave the EU without a deal at the end of March, Honda joined Mini in bringing forward a scheduled plant shutdown to coincide with potential border disruption.

According to SMMT figures, the UK new car market declined by 6.8% in 2018, with annual registrations falling to 2,367,147 units.

A 5.5% decline in December capped what the industry body described as a "turbulent year of model changes, regulatory upheaval and continued anti-diesel policies, adding to the ongoing decline in consumer and business confidence".

Private, fleet and business registrations all fell in 2018, with the biggest losses felt in the fleet sector, which fell by 7.3%, while private motorists and smaller business operators registered 6.4% and 5.6% fewer new cars respectively.

Demand also fell across all vehicle segments except SUV, which grew by 9.1% to take a fifth of the market (21.2%). 

A 29.6% decline in diesel registrations wiped more than a quarter of a million units off the annual total, with the volume loss equivalent to 180% of the overall market's decline.

The SMMT says anti-diesel rhetoric and negative fiscal measures took their toll, with December marking the 21st consecutive month of decline for diesel - despite new emissions tests showing diesels deliver in the real world. 

Growth in registrations of petrol and alternatively fuelled vehicles replaced some of the loss, says the SMMT, but not enough to offset the full shortfall as many diesel owners adopt a 'wait and see' approach, keeping hold of their older, more polluting vehicles for longer.

The SMMT published data showing the UK new car fleet average CO2 rose for a second successive year, by 2.9% to 124.5g/km.

It says this is despite huge investment by manufacturers to deliver ever more efficient cars, with the average new or updated model emitting 8.3% less CO2 than the one it replaced.

While part of this fleet average CO2 increase was due to segment shift and the introduction of the new, more onerous WLTP test, which produces higher figures, the move away from diesels is having a significant impact.

The SMMT says diesels are, on average, 15-20% more efficient than petrol equivalents and so have a substantial role to play in addressing climate change. 

The organisation says what it describes as "the hard-won gains made by the sector since CO2 records began in 1997 (when the new car fleet average was 189.8g/km)" are being undermined by the shift away from diesel and disappointing growth in alternatively fuelled vehicles. 

Mike Hawes, SMMT chief executive, said: "A second year of substantial decline is a major concern, as falling consumer confidence, confusing fiscal and policy messages, and shortages due to regulatory changes have combined to create a highly turbulent market.

"The industry is facing ever-tougher environmental targets against a backdrop of political and economic uncertainty that is weakening demand, so these figures should act as a wake-up call for policy-makers. Supportive, not punitive measures are needed to grow sales, because replacing older cars with new technologies, whether diesel, petrol, hybrid or plug-in, is good for the environment, the consumer, the industry and the exchequer."

The move away from diesel has hurt Jaguar Land Rover (JLR), the UK's largest car manufacturer, which announced global job losses of around 4,500 people earlier this month as it seeks savings of £2.5 billion, following a year when the company had already downsized by 1,500 employees.

It has plans to develop next-generation electric drive units (EDU) later this year, which will be produced at the company's engine factory in Wolverhampton. These EDUs will be powered by batteries assembled at a new Jaguar Land Rover Battery Assembly Centre at Hams Hall, in North Warwickshire.

JLR says its Battery Assembly Centre will be one of the largest of its kind in the UK, and will use new production techniques and technologies to manufacture battery packs for future Jaguar and Land Rover vehicles.

JLR is also suffering from a drop in demand in China, the company's largest market, where its sales fell by more than 20% in 2018, and where a deepening economic slowdown is predicted in 2019.

Other European manufacturers with production bases in the US are also at risk from trade tensions between the US and China, with tariffs currently in force on imports.

Ford has announced that it is restructuring its European operations, which will result in job losses and changes to the manufacturer's model line-up in the next few years.

The biggest brand in the UK car and LCV market has started consultations with unions and other key stakeholders to implement a strategy to deliver sustainable profit in Europe.

Ford's petrol engine plant in Bridgend will be scaled down as the manufacturer's powerplant line-up changes, and a part of the plant that produces engines for JLR will close as the premium brand brings engine design and production in-house at its Wolverhampton engine factory.

Ford announced a "more targeted portfolio" of European-built passenger vehicles, with every new car being offered with some kind of electrification, and a renewed focus on its SUV range.

The Edge has been revamped for 2019, while a replacement for the Kuga is expected later this year, and the company has begun formal discussions with its works council to end production of the C-Max and Grand C-Max MPVs.

Ford plans to consolidate its UK headquarters and Ford Credit Europe's headquarters at the Ford Dunton technical centre in Essex to improve business fitness and create a customer-centric technical hub, subject to union and local approval.

The company has also entered into a partnership with Volkswagen to develop LCVs jointly in future, and improve growth and profitability.