UK new car registrations fell 9.0% last month, driven primarily by an 18.2% fall in registrations to large fleets, but EV demand continued to rise.

UK new car registrations fell 9.0% but battery electric vehicles (BEV) bucked the trend with a 9.9% rise

The new figures from the Society of Motor Manufacturers and Traders (SMMT) show a total of 112,162 cars were registered in July – the fifth month of consecutive decline, although the fall is the smallest recorded this year.

The fall was attributed to the ongoing ‘trilemma’ – as EY has termed it – of supply chain pressures exacerbated by Covid and the war in Ukraine, energy transition and economic challenges.

Fleet was the only sector to be hit though – the 18.2% decline saw it fall to 50,014 units, while year-to-date the sector is down 25.4% and now only commands a 44.2% share of the overall marketplace compared to 52.5% for the first seven months of 2021.

While the decline in fleet is due in part to the well-documented issue of manufacturers putting emphasis on higher-margin private sales, Jamie Hamilton, automotive partner and head of electric vehicles at Deloitte, said that CFOs expect a recession within the next 12 months and are taking a more defensive balance sheet stance.

“As a result, fleet purchases are likely to have become less of a priority,” he stated.

In stark contrast, private registrations remained exactly static in July – the total of 59,847 vehicles registered was down by just seven units on the same month last year. Year-to-date, the segment is actually up by 3.7% to 487,914 units and with a 53.4% market share compared to 45.5% for the first seven months of 2021.

It’s a similar picture for ‘Business’ registrations to fleets with fewer than 25 vehicles – they remained broadly static in July, down just 0.5% to 2,301 units and were actually up 7.6% YtD.

Battery electric vehicles (BEV) bucked the trend in the overall new car market – they grew 9.9% to 12,243 units to achieve a 10.9% market share for the month. It’s the weakest monthly growth for BEVs since the pandemic but YtD they’re up 49.9% to deliver a 13.9% market share – which the SMMT said illustrates the volatility in the supply chain. Meanwhile, Deloitte said the continued rise in EV take-up can be explained, in part, by some manufacturers prioritising the production of battery electric vehicles as semiconductor supplies remain constrained.

Hybrid electric vehicle (HEV) uptake fell 6.7% in July to take 12.2% of the market, while plug-in hybrids (PHEVs) fell 34.0%, which cut their market share to 5.8%.

Based on the challenging first-half conditions, the industry outlook for the full year has now been revised downwards, to 1.6 million new car registrations – a 2.8% fall on 2021, with the industry facing its most challenging year for three decades.

Around two million registrations have been lost since Covid, effectively representing a loss of a year’s registrations.

Plug-in market share will continue to grow, however, to reach 22.6% as manufacturers prioritise investment in zero-emission vehicle production.

The 2023 outlook has also been revised downwards since the April estimate, but is likely to be an improvement on 2022, with overall registrations anticipated to reach to 1.89 million (rather than 2.02 million), with plug-ins comprising 27.8% of the market.

Mike Hawes, SMMT chief executive, said: “The automotive sector has had another tough month and is drawing on its fundamental resilience during a third consecutive challenging year as the squeeze on supply bedevils deliveries. While order books are strong, we need a healthy market to ensure the sector delivers the carbon savings government ambitions demand. The next Prime Minister must create the conditions for economic growth, restore consumer confidence and support the transition to zero-emission mobility.”

The need to transform

David Borland, EY UK & Ireland automotive leader, welcomed the increased uptake of BEVs but said latest evidence on climate change showed the need to go further.

He outlined: “As a stark warning of the impact climate change is having, this year was the driest July for almost 90 years. A clear reminder of the importance to decarbonise the sector.”

Borland also noted that July’s “exponential” rise in petrol prices was further fuelling consumer interest in BEVs.

He continued: “Although electric cars are nothing new, they’re seeing an explosion in popularity well ahead of the impending ban on the sale of internal combustion engine (ICE) cars. Advances in battery technology means a 200+ mile range is becoming a reality, without compromising performance.”

Meryem Brassington, electrification propositions lead at Lex Autolease, added that demand for electric vehicles continues to paint an encouraging picture for the UK’s electrification journey.

“While this growth is welcome, ongoing material shortages and vehicle supply issues continue to affect the EV market and could put the brakes on the good progress already made, leading to significant implications for fleet renewal,” she continued.

“Policymakers have played an important role in helping to drive the uptake of electric vehicles this year and all eyes will be on the Government in the autumn for clarity on company car tax rates beyond 2025 – with the hope that any changes remain gradual and proportional.”

Deloitte also warned that incentives for BEVs remain vital; many new fully electric cars remain substantially more expensive than their petrol or diesel comparable, and cost remains a major factor for consumers.

The firm’s Jamie Hamilton added: “The removal of financial incentives in other markets has supressed demand and many expect the same for EVs with the removal of plug-in vehicle grants.”

But John Evison, associate partner at OC&C Strategy Consultants, said demand for BEVs will remain strong “as OEMs are likely to prioritise EV orders over petrol or diesel, primarily due to the higher margins and requirements to meet strict emissions targets”.

And used car platform Heycar has pointed out that “in London alone, Sadiq Kahn’s ULEZ expansion plans means a considerable proportion of Londoners are reportedly planning to switch to electric, which would further support EV sale figures”.

On the retail side, Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), said that motor dealers are now seeing softening in demand driven by the increasing cost of living.

More than 60% of respondents to a poll by the association said they believe the ongoing crisis is having a severe impact on their business.

She added: “When polled 73% of our members are dissatisfied with the Government’s support towards EV. Franchised dealers continue to support green motorists in finding the right service and financial support plans and as such need government support to facilitate the 2030 ban on the sale of new ICE vehicles.”