New car registrations by fleets of all sizes rocketed in January, helping the market score its sixth month of growth.

January’s rise was underpinned by strong fleet demand and EV take-up

A total of 131,994 new cars were registered last month, up 14.7% and marking the best start to the year since January 2020’s pre-Covid 149,279 units, according to the Society of Motor Manufacturers and Traders (SMMT).

The rise was underpinned by strong fleet demand on the back of months of supply chain disruption. Registrations to larger fleets were up 36.8% to 69,540 units – accounting for 52.7% of the market – while ‘Business’ registrations to firms with fewer than 25 vehicles climbed 45.6% to 2,815 units. In contrast, private registrations fell 4.3% – the result of both the impact of the cost-of-living crisis but also skewed market performance from last year’s vehicle supply shortages.

Electric vehicles yet again put in a star-studded performance. Battery electric vehicle (BEV) registrations rose 19.8% to reach 17,294 units, or 13.1% of new registrations – slightly below the average recorded for 2022.

However, the largest rise was seen in hybrid electric vehicles (HEVs) which increased volumes by 40.6% and accounted for 14.4% of new car registrations.

Plug-in hybrid vehicles (PHEVs) saw a 0.7% rise, although their share fell to 6.9% of new cars, from 7.9% for the same month in 2022.

Plug-ins are now predicted to account for more than one in four new registrations this year at some 487,140 units, and almost a third (31.0%) of the market in 2024 at 607,150 units.

But the new car industry continues to warn of the need for increased charging infrastructure to support them. In 2022, one standard public charger was installed for every 53 new plug-in cars registered, the weakest ratio since 2020. As the market awaits details of the ZEV mandate, carmakers are also calling for mandated rollout targets for infrastructure and regulated service standards.

More immediately, the industry is urging for the Government to take action in the Spring Budget to reduce VAT on public charge point use from 20% to 5% in line with home charging – although the Government has already rejected calls for this.

The SMMT also urged the Treasury to rethink its plans to make electric cars and vans pay Vehicle Excise Duty from 2025, in particular ending the current Expensive Car Supplement exemption for EVs. It says currently more than half of all available BEVs would be subject to the supplement from this date. And it’s urged the Government to increase the Advisory Electric Rate, used to reimburse electric company car drivers for business mileage.

Mike Hawes, SMMT chief executive, said: “The automotive industry is already delivering growth that bucks the national trend and is poised, with the right framework, to accelerate the decarbonisation of the UK economy. The industry and market are in transition, but fragile due to a challenging economic outlook, rising living costs and consumer anxiety over new technology. We look to a Budget that will reaffirm the commitment to net zero and provide measures that drive green growth for the sector and the nation.”

Fleet sector mirrors calls for charge point action

The SMMT’s message on the need for advanced charge point rollout to further drive take-up is backed by many across the fleet sector.

Kim Royds, EV director at British Gas, said maintaining the momentum in the number of EVs arriving on UK roads was not going to be an easy ride without boosting the levels of investment in the charging network.

She added: “It is vital that the Government increases the pace at which public chargers are being installed across the country. What’s more, it needs to work with organisations and public authorities to maintain these services, and ensure they are accessible to those without off-street parking that need them the most.

“Ultimately, we need drivers to have the confidence that there are enough charge points for them to use if the UK’s EV revolution is to gather pace. If not, we may see a tipping point where the supply of vehicles outstrips the number of chargers available, stalling the good progress that has already been made.”

And Jon Lawes, managing director at Novuna Vehicle Solutions, also expressed concerns for government EV targets without action.

“As registrations continue to bounce back at the start of 2023 in response to a gradual easing of supply chain shortages, there is cautious optimism within the industry for a sustained upturn over the coming months.

“However, maintaining this momentum relies heavily on increased government-led intervention to prioritise an exponential growth in the rollout of public charge points, to match the demand for EVs, and clarity for the industry, on its commitment to introduce a ZEV mandate. Without this, the Government’s ambition to realise an EV revolution by 2030 frankly looks implausible.”

Nick Williams, transport managing director at Lloyds Banking Group, also said the current rate of charge point rollout was one of the biggest hurdles to widespread EV ownership

“The increases we’re seeing in new EV registrations are promising, but our infrastructure must be able to support them – only then will the UK be able to truly deliver on its ambition to be a global leader in the electrification of transport,” he stated.

Industry outlook for 2023

The SMMT has also published the latest market outlook, which anticipates 1.79 million new car registrations in 2023, an 11.1% increase on the past year but still well below 2019 levels. This also represents a 0.8% reduction on October’s outlook, against a weak economic backdrop. However, a further 9.3% increase is expected in 2024, with 1.96 million new cars expected to join the road next year.

Chris Knight, UK automotive partner at KPMG, said market conditions were likely to change this year: “Car makers have enjoyed a period of higher profits due to the low availability of new cars, which has also increased used car values. As supply issues gradually resolve, combined with a reduction in household spend for the majority of buyers, we’re seeing a more competitive landscape and a return to better deals and discounting in the new car market. This is also cooling used car values.

“We expect to see a plethora of new auto brands launch in the UK in the coming months, further increasing consumer choice at all budget levels.”

EY also commented, saying that the automotive sector has reasons for optimism but warning of a challenging year ahead for the UK car industry.

David Borland, UK & Ireland automotive leader, pointed to the publication of carmakers’ Q4 and full year results, which showed some manufacturers report a return to profitability on the back of easing supply chain concerns, as well as benefits from ongoing transformation programmes.

“Despite these reasons for optimism, there’s no doubt that the UK automotive sector is at a critical juncture. It plays an important role in the UK’s economic viability, leveraging our strength in manufacturing and innovation with a skilled and flexible workforce. To ensure the full potential of the industry is realised, it is vital that UK policy supports the sector and generates public and private investment,” he stated.