It was another month of agonisingly low new car sales in May, with just over 20,000 new vehicles registered – compared to nearly 184,000 in the same month last year.
The only good news is that it was a considerable improvement on April’s numbers, when only about 4,000 new cars were registered. The five-fold increase was due to the government allowing car dealers to operate on a ‘click-and-collect’ basis, meaning dealers and manufacturers who had systems in place to support this could at least get a limited number of cars out the door.
According to data released this morning by the Society of Motor Manufacturers and Traders (SMMT), it was private buyers and small business who really took advantage of online new car purchasing. Private buyers normally make up just over 40% of new car registrations each month – in May it was nearly 64%, with private sales almost doubling fleet registrations.
It was still the worst set of results for May since 1952, when the world was a very different place. However, with dealerships in England allowed to open again from the start of this week, we can at least expect that June’s results will show another step forward as the country tries to ease back towards some kind of normality.
New market trends or anomalies?
With a market that was still 89% off last year’s levels, and two months of showrooms and car factories being closed, it would be foolish to read too much into some of the big changes in market share for different vehicles. The numbers are likely to be more representative of what vehicles were available and able to be delivered, rather than genuine customer demand. Nevertheless, the industry is keen to understand how consumer and business appetites are changing. Will the sort of cars that were popular pre-lockdown still be as popular post-lockdown?
A superficial look at the registration data shows a record market share for electric vehicles and a new low for diesels. Realistically, both of those results are in line with predicted trends, but the scale of the shift is somewhat overstated. One of the leading click-and-collect automotive brands is Tesla, which is an electric-only car company and therefore significantly influences the overall data. This also helped the Tesla Model 3 to be the best-selling car in the UK in May (although it has certainly been a very popular car since it was launched here last year).
It’s certainly likely that the coronavirus shutdowns and market collapses around the world will accelerate car makers’ plans to phase out diesel models as part of inevitable cost-cutting measures that will be rolled out, but the ability to ramp up production of new electic models is likely to also be impaired, so we may see further short-term growth in the popularity of petrol power at the expense of diesel before electric models can really start to grow their market share.
Who will benefit once car sales resume?
If we rewind a decade or so, the government introduced a scrappage scheme to help the car industry recover from the 2008 financial crisis. It’s only in recent years that we have seen how profoundly this permanently changed the new car market. The two brands who benefitted most from the scrappage scheme were Hyundai and Kia, as a combination of £2,000 scrappage deposit and a little-understood finance product called a PCP helped thousands of people to get into a new car for as little as £99 a month.
This gave both brands a massive boost, which helped establish them as big players in the industry over the last decade. The free deposit/low monthly payment attraction of PCP finance also saw a seismic shift in how consumers bought cars. Luxury brands like Mercedes-Benz, BMW and Audi all benefitted as their cars became afforable for more people, while mainstream brands – particularly Vauxhall – were squeezed hard.
There will be potentially be even more profound changes to the new car market that arise from the coronavirus pandemic. Several already-struggling car brands are reported to be considering whether to exit the European market altogether Some car companies may not survive at all.
Those brands who can built strong online sales divisions are likely to benefit, and those who have electric cars immediately available to capture rapidly-growing demand will also prosper. Tesla ticks both of those boxes, so it should really start to make inroads. There will now be a mad scramble from other brands to fast-track new electric models, assuming they have enough cash left to invest…
Will we see another scrappage scheme?
Possibly, although it may not happen in the next few months. If it does, there is likely to be pressure on government to prioritise low-emissions models rather than the blanket approach used last time (where you could claim a £2,000 deposit towards a new Lamborghini or Rolls-Royce).
And now that Britain is no longer going to be bound by EU regulations on state support, there will also be calls for any government contributions to favour British-built cars rather than imported vehicles.
Top ten is slightly less bizarre than last month
Last month’s best-sellers list was one of the most unusual ever seen. This month we have a few more familiar names in the top ten, even if the order is still more jumbled than normal.
The Tesla Model 3 takes top honours, as the company enjoys the dual benefit of consumer demand for electric vehicles and a far more sophisticated online buying process than any rival brand. The new Vauxhall Corsa pipped its arch-rival, the Ford Fiesta, for second place.
After a number of unexpected top ten debuts last month (all of which disappeared again this month), we have more new entries in May. The Volvo XC40 was sixth, while the Mercedes-Benz GLC and E-Class models appeared in eighth and tenth places, respectively.
There was not a single British-built car in the top ten in May, so hopefully that will be an anomaly rather than a trend once production resumes and sales start to return to something approaching normal.
We’ll run our usual analysis of the top ten in the next few days.