New car registrations for the UK rose in January, bolstered by rapidly rising demand for electric vehicles.

BEVs and PHEVs accounted for over a fifth (20.4%) of the UK new car market in January

A total of 115,087 new cars were registered last month, up 27.5% on January 2021 when showrooms were forced to shut again due to lockdown restrictions.

However, the market is still vastly down on pre-pandemic levels, with registrations 22.9% lower than in January 2020 – largely the result of the ongoing chip shortages.

The new figures from the Society of Motor Manufacturers and Traders (SMMT) also reveal that growth was mainly driven by private buyers – as a result of manufacturers prioritising these customers among the supply constraints. Registrations for this segment stood at 62,300 new cars, up 64.1%, year on year – and only 5.6% off pre-pandemic levels

Fleet registrations held steady – the total of 50,817 units was just 0.4% down on January 2021. Business registrations, to fleets of fewer than 25 vehicles, were up 52.7% to 1,970 units.

Growth was also bolstered by strong demand for electrified vehicles; battery electric (BEV), plug-in hybrid (PHEV) and hybrid (HEV) cars accounted for 71.5% of the uplift in registrations.

A total of 14,433 BEVs (up 131%) and 9,047 PHEVs (up 47.3%) were registered last month, accounting for over a fifth (20.4%) of the market. With 13,492 HEVs (up 98.1%) also registered, almost one in three (32.1%) new cars joining British roads in January was electrified.

Newly published SMMT average CO2 data also reveals that new car emissions fell by 11.2% for 2021 as a whole, reaching the lowest-ever recorded level of 119.7g/km.

The association did, however, warn that cutting CO2 even further will require more drivers to switch to electric and other zero-emission technologies – and this will require further action on a perceived lack of charging infrastructure, especially as demand on charging is increasing exponentially.

It’s also said that manufacturer action to bring down the cost of switching to EVs must be backed by government support through purchase incentives and reduced motoring taxes.

The latest industry outlook reveals just how much demand for BEVs and PHEVs is expected to rise this year – the forecast is for registrations to grow by 61% and 42% respectively in 2022, meaning that, by the end of the year, almost one in four new cars would be a plug-in.

Total new car registrations are also expected to rise; the forecast for 1.897 million units is up by 15.2% on 2021 but down 17.9% on pre-Covid 2019. It’s also a downward revision from October’s outlook of 1.96 million, as the ongoing semiconductor shortage, increasing costs of living and rising interest rates are expected to dampen some demand in 2022.

A strengthening market as supply pressures ease

Speaking on the January figures, SMMT chief executive Mike Hawes said it was reassuring to see a strengthening market.

“Once again it is electrified vehicles that are driving the growth, despite the ongoing headwinds of chip shortages, rising inflation and the cost-of-living squeeze. 2022 is off to a reasonable start, however, and with around 50 new electrified models due for release this year, customers will have an ever-greater choice, which can only be good for our shared environmental ambitions.”

Deloitte said it was hard to gauge what January 2022’s results signal for the year ahead, given a combination of factors, including a growing squeeze on the cost of living and unresolved supply chain issues.

Jamie Hamilton, automotive director and head of electric vehicles, added that it may not be until well into the second half of the year that we can more accurately establish what the baseline is for UK car sales.

But he continued: “The good news for manufacturers and dealers is that supply pressures caused by the semi-conductor shortage are starting to ease. Global markets – most notably the US and China – saw a rebound in car sales at the end of 2021, with reports of a similar story in automotive production in East Asia and Mexico.

“The point at which supply issues are fully resolved, it’s likely we’ll see substantial pent-up demand released in the UK, which bodes well for the industry’s prospects in 2022.”

Meanwhile, KPMG’s Richard Peberdy, UK head of automotive, said a return to office working for some people over the coming weeks could prove positive for the sector.

“As more of us again begin to commute, albeit with many facing fewer miles and days on the road than pre-pandemic, it will be interesting to see what this means for the car market over the coming months.

“The continued boom in electric vehicle adoption will be a key part of this picture, including many companies assessing their fleet and company car schemes, in light of their ESG commitments.”

Hitachi Capital Vehicle Solutions also said that the figures showed demand for electric vehicles was only going one way and added that in the coming months we can expect to reach the watershed moment where one in two new cars registered will be an EV.

Managing director Jon Lawes continued: “However, the well-documented semiconductor shortage is hampering OEMs ability to efficiently allocate EVs across all areas of the market where strong demand is present. To negate these issues, fleets should look to leasing providers offering innovative, flexible solutions with the reassurance of price protection to facilitate the continued surge in EV uptake once the backlog has subsided.

“In the meantime, clarity from the Government on how it plans to counteract the potential tipping point of EV tax breaks and salary sacrifice schemes coming to an end would be welcomed across the board.”

And Lex Autolease urged government departments and industry bodies to continue working together to ensure the UK remains the most attractive place for electric vehicle production.

Meryem Brassington, electrification propositions lead, said: “Recent manufacturer commitments from Jaguar Land Rover and Bentley, and the announcements of a battery recycling plant and gigafactory by Britishvolt, have brought renewed impetus for the Road to Zero policy, helping to make certain that more vehicles on the roads are truly sustainable.

“Today’s publication of the Transport Committee Road Pricing Report will also spark a wider conversation around the future for EV users, so we look forward to better understanding the implications and next steps.”