Expert Blog

Economic uncertainty hits new car sales in 2017

20171006_Economic uncertainty hits new car sales in 2017 [1]

For the first time in more than five years, registrations of new cars have fallen year-on-year. The latest figures from the Society of Motor Manufacturers and Traders reveal that 2.61 million new cars were registered in the year to September, down 2.9% on the previous 12 months.

As the graph above shows, this fall is mostly due to lower demand from private buyers. Private registrations are down 5.4%, whereas fleet and business registrations are roughly the same as they were a year ago.

Part of this is simply reversion to the mean: after five years of record-breaking sales, it’s hardly surprising that demand for new cars has dropped off slightly. But it is also partly due to economic forces that extend far beyond the automotive sector: depressed consumer confidence and relatively low GDP growth. As the SMMT’s Chief Executive Mike Hawes says, ‘Business and political uncertainty is reducing buyer confidence, with consumers and businesses more likely to delay big ticket purchases.’

There is some good news in these statistics, though, and that’s the continued rise of low-emission vehicles. 113,081 new alternatively-fuelled vehicles (AFVs) were registered in the year to September, up an impressive 30.8% on the 86,437 that were registered in the previous 12 months. In fact, uptake of AFVs is not only continuing to rise, but actually accelerating as new, improved models come onto the market and prices come down. They now account for 4.3% of all new cars registered over the past year – their highest market share to date.

Meanwhile, diesel sales have fallen dramatically. They’re down 11.7% year-on-year, reflecting growing concerns about air pollution. The SMMT has expressed concerns that policies designed to disincentive older, dirtier diesels – such as those contained within the Government’s recent Air Quality Plan – may also be putting drivers off buying newer, cleaner models.

But there’s one set of clean air measures that might help to increase demand for new cars: scrappage schemes for old vehicles, such as those introduced by Ford, BMW and other manufacturers in recent months. These could help to boost car sales, while also reducing air pollution and greenhouse gas emissions.

More generally, though, the car industry – like so many other parts of the economy – needs consumer confidence to recover. Until it does, we probably won’t see record-breaking years like 2016. Nevertheless, it’s worth remembering that 2.61 million new cars were sold during a difficult 12 months for the British economy. That demonstrates once again just how resilient our automotive sector is.

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