Expert: Brexit is hitting car sales
Seán Kemple, director of sales at Close Brothers Motor Finance, pins the blame for falling car sales on Brexit (along with the global economic slowdown, and confusion over fuel types following the diesel debacle).
He explains:The last couple of months has seen £100bn wiped off the value of the world’s biggest listed carmakers last year and car production slumping in the third quarter of 2018.
“Brexit is absolutely having an impact on consumer confidence, and we can see that in these car sales. The priority for now is to hope that the Government’s withdrawal agreement delivers some clarity upon which we can start to move forward. However, we still have confusion in the market place from fuel types to finance options, which will continue to exist once Brexit is out the way.
During this extended period of uncertainty, dealers are best placed to be a source of expertise and reassurance to customers. If they hope to bolster their bottom lines, they must seize this opportunity with both hands as we move into 2019.”
Plummer explains:Brexit anxieties also cast a long shadow last year and will continue to do so beyond the UK’s withdrawal of the EU. A ‘no deal’ will likely impact new car sales as poor exchange rates and potential tariffs could force brands to pass on the cost to consumers.
However, a smooth Brexit resulting in stable exchange rates and trade agreements, would signal to manufacturers that the UK remains a positive growth market with good profit opportunities, ensuring both a healthy pipeline of new stock and some great deals for consumers.
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The SMMT says:The biggest losses were felt in the fleet sector (down -7.3%), while private motorists and smaller business operators registered -6.4% and -5.6% fewer new cars respectively.
More than 141,000 alternatively-fuelled vehicles were sold, up from almost 117,000 in 2017. That’s a 6% share of total sales.
Petrol electric hybrids remained the most popular choice, up +21.3% to 81,156 units. Sales of “pure electric cars” rose by 13.8%, but only make up 0.7% of the overall market (with 15,474 sold).
The SMMT fears that growth is slowing, thanks to the government’s controversial decision in October to lower, or scrap, grants for hybrid and electric vehicles.
Given the reduction in government incentives, the pace of growth of plug-in cars is now falling significantly behind the EU average.
UK CAR SALES SLIDE CONFIRMED
The Society of Motor Manufacturers and Traders has just reported that new registrations slumped by 6.8% last year, as anticipated earlier this morning, to 2,367,147 units.
It’s the second annual decline in a row, as this chart shows:
Diesel sales crashed by 29.6% in 2018, as drivers were deterred from buying a new model (or trying to sell their old one) by the aftermath of Volkswagen’s emissions scandal.
The SMMT says the industry suffered “a turbulent year”, with consumer and business confidence falling (thanks, Brexit!), plus model changes, regulatory upheaval and continued anti-diesel policies.
Mike Hawes, SMMT chief executive, says:
More to follow....“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.”
German factory orders dropped by 1% month-on-month in November, the first monthly decline in four months.
On an annual basis, orders were 4% lower than a year ago - suggesting trade war fears, Brexit, and the wider eurozone slowdown are all hurting Europe’s latest economy.
The German discount supermarket chain has just recorded its busiest ever week, as shoppers splashed out on its premium offerings for Christmas.
My colleague Rob Davies explains:
Aldi sold nearly £1bn of goods in the UK during December thanks to rising demand for its premium ranges, the discounter said on Monday.
The German supermarket giant’s British arm, the country’s fifth-largest grocery chain, said the week beginning 17 December was the busiest in its history, with sales up 10% on last year.
Aldi said its sales performance reflected a surge in demand for its premium ranges – Specially Selected and Exquisite.
“We begin the new year with great momentum as the UK’s fastest-growing supermarket and on the back of record Christmas sales,” said the chief executive, Giles Hurley.
Car sales: what the media say
The Independent has highlighted the dangers posed by Brexit:Mike Hawes, chief executive of the SMMT, said the drop was due to a combination of new emissions tests leading to supply bottlenecks, diesel drivers holding on to their cars for longer and low consumer confidence.
“Brexit is an issue,” he said, but he added that it would be “unfair to attribute [the decline] wholly to Brexit.” He said Dieselgate — the scandal that revealed widespread cheating in emissions testing by manufacturers — was probably the most significant factor as it was the only category in which sales dropped.
Sky News points out:The SMMT said that its members had spent some time examining what might happen under a disruptive no-deal Brexit, but many car imports are through specialist centres such as Immingham rather than the traditional cross-channel routes. There seems to be little sign, as yet, of consumers buying cars in advance of possible shortages, but the SMMT said that a first-quarter sales boost in 2019 was possible. It added that its members had not been stockpiling new vehicles.
On the other hand, UK manufacturing operations have very little scope for warehousing new parts and any disruption to the 1,100 trucks a day coming to deliver parts to assembly lines across Britain would mean line stoppages, a rapid escalation in costs and a threat to future production and investment.
The SMMT, like other business bodies, is calling for MPs to back Theresa May’s Brexit agreement and avoid a no-deal scenario.
It says that crashing out of the EU without an agreement risked destroying the car manufacturing industry, which employs more than 850,000 people in the UK.
How diesel scandal hurt the industry
This hurt demand for new diesel cars, and slashed the second-hand value of old diesels - making it harder to trade them in for a shiny new model.
The scandal also prompted regulators to introduce a new tougher test, the Worldwide harmonised Light vehicles Test Procedure (or WLTP). It did a better job of simulating real-world driving conditions, making it harder for manufacturers to cheat.
However, this also caused significant delays, as manufacturers have struggled to get their new models tested, and certified as compliant with WLTP.
UK car sales have now fallen for two years running. The 7%-ish drop in 2018 follows a 5.7% drop in 2017.
SMMT: Brexit is an existential threat
The agenda: UK car sales suffer worst fall in a decade
A potent cocktail of threats have hit Britain’s car industry in the last year, sending sales sliding at their fastest rate since the financial crisis.
New car sales slumped by almost 7% in 2018, according to new data from the Society of Motor Manufacturers and Traders, to around 2.37 vehicles.
It blames a Brexit-induced slide in consumer confidence, the diesel emissions scandal and a new, more rigorous testing regime which has made it harder for European manufacturers to get models on the road.
This is the biggest drop in car sales since 2008, when car sales slumped by over 11% in the aftermath of the financial crisis. It’s the latest signal that the UK economy has weakened.
The SMMT also predicts that sales will fall 2% in 2019, even on the assumption that Britain leaves the EU in March with a withdrawal agreement.
The trade body has declined to estimate how car sales would perform in a no-deal scenario -- something the SMMT sees as a “catastrophe” for the UK car industry (given its reliance on just-in-time supply chains, and the single market).
The SMMT will release its final figures for 2018 at 9am GMT, so stay tuned.
Also coming up todayAfter some wild sessions recently, global stock markets are starting the new week in a better mood.
Shares have risen in Asia, after Federal Reserve Chairman Jerome Powell tried to reassure investors - saying the Fed’s interest rate policy is flexible and officials are “listening carefully” to financial markets.
Britain’s FTSE is expected to open a little higher too.
- 9am GMT: UK car registration figures for December 2018
- 9.30am GMT: Eurozone Sentix investor confidence report for January