Poor start to 2018 as car registrations continue decline

January saw a poor start to the year for new vehicle sales, with registrations falling by more than 6% – echoing the trend from last year.

The business sector was the most subdued, with registrations down almost 30% compared with the same month last year, while demand for diesel-powered cars was also on-trend, down by more than a quarter (25.6%) compared to January 2017.

Industry trade body, The Society of Motor Manufacturers and Traders has expressed concern at the figures, while analysts say the picture since last April shows a clear weakening of performance.

SMMT figures showed 163,615 cars were driven off forecourts in January, a 6.3% fall compared with the same month in 2017.

Demand fell across the board, with registrations by business, private and fleet buyers down 29.7%, 9.5% and 1.8% respectively.

Continuing the trend of recent months, dual purpose cars (SUVs) were the only vehicle segment to see growth, with demand up 6.6% to account for a fifth (20.2%) of all new car registrations. Five of the top 10 bestselling models were in this category.
Demand in all other segments fell, with the biggest declines affecting the mini, MPV and executive segments.

Elsewhere in the market, registrations of petrol and alternatively fuelled vehicles (AFVs) rose, up 8.5% and 23.9% respectively. However, this growth failed to offset a significant decline in demand for new diesel cars, with the SMMT continuing to blame poor consumer confidence and confusion over government policy as the reasons for the decline.

The trade body said its latest figures illustrated the importance of diesel cars and engines to the UK economy. Last year, more than two in five of the cars leaving British production lines were diesels, while manufacturers also produced more than 1 million engines – directly supporting some 3,350 jobs and, combined with the UK’s petrol engine output, delivering some £8.5bn to the economy.

Mike Hawes, SMMT chief executive, said: “The ongoing and substantial decline in new diesel car registrations is concerning, particularly since the evidence indicates consumers and businesses are not switching into alternative technologies, but keeping their older cars running.

“Given fleet renewal is the fastest way to improve air quality and reduce CO2, we need government policy to encourage take up of the latest advanced low emission diesels as, for many drivers, they remain the right choice economically and environmentally.”

Commenting, Howard Archer, chief economic advisor to the EY ITEM Club, said the car industry would only take limited consolation from the fact that January’s decline was less than the double-digit year-on-year drops seen over the previous three months: 14.4% in December, 11.2% in November and 12.2% in October.

“January’s drop of 6.3% y/y in new car sales followed an overall fall of 5.7% in 2017. This was the first decline since 2011 and the steepest since 2009,” he said.

“January marked a 10th successive decline of falling car sales, pointing to a serious loss of momentum in the sector. Some car sales were clearly brought forward into the first quarter of 2017 (when they were buoyant) by consumers and businesses looking to beat the changes to vehicle excise duty (VED) that were introduced in April. However, the fact that car sales have fallen year-on-year every month since April 2017 points to a clear weakening underlying performance.”

Simon Benson, head of motoring services at AA Cars, said: “This data is the first real temperature test of the overall health of the new car industry in 2018, and it paints a fairly bleak picture.

“With the market now in its 10th month of decline, motorists are clearly wary about purchasing a new vehicle. In fact, our own research suggests a lack of consumer confidence cost the industry an estimated £2.6bn in 2017.

“The government needs to act now to incentivise new car buyers back to forecourts before this decline causes real damage.”