New car registrations have collapsed across Europe as a result of coronavirus shutdowns, according to data published in the last day or so. UK registration data for March is dur to be published on Monday morning, and will inevitably show the same devastating results.
European results published so far have shown that new car registrations have collapsed by 85% in Italy, 72% in France, 69% in Spain and 38% in Germany. These are the four biggest car markets in the EU, and Italy in particular was the first country to go into widespread lockdown.
What can we expect in the UK?
March is traditionally the biggest month of the year for new car sales in the UK, as buyers flock to buy or lease a new car with the latest registration plates (in this case, a 20-plate registration). However, with most car dealers now closed and the majority of the population stuck at home, sales numbers look set to tumble. A number of cars would have been registered and delivered in the first few days of the month, but this came to almost a complete halt in the last couple of weeks.
Here in the UK, more than half of all new car sales are fleet registrations. Based on European data, this sector is likely to be hit hard as rental companies stop taking deliveries of new cars and other companies defer replacing company cars as much as possible. Any business that is able to cancel or defer new vehicle purchases is likely to be doing so.
March is always a big month proportionally for private new car sales (comsumers tend to care more about their number plates than businesses), so final numbers are likely to depend on how many new car buyers were able to get into a new car before the lockdowns took hold.
Depending on how long the current shutdown lasts, there may be a boost to new car sales once dealers eventually re-open in May/June/July/whenever, but the likelihood is that any customers who are able to wait are more likely to put off any new car purchase until the next number plate change in September (when 70-plate registrations begin).
There is some good news, albeit with complications, for the industry in that more than 80% of all private new cars are made with PCP car finance, which means that tens of thousands of customers will need to change their car and don’t have the option of waiting. The complicated bit is that thousands of customers have PCP agreements that are expiring now while dealerships are closed and they physically can’t buy a new car. We have reached out to a number of finance companies for comment on how they are managing this, and will update our site with advice as soon as we can.
How bad will the March meltdown be?
We’re expecting March new car registrations to be published on Monday 6 April. Depending on how many cars dealers were able to deliver, and how many self-registrations took place, we could be looking at a fall of anything from 50% to 80% compared to the same month last year. There will also probably be widespread variation across the industry, with some companies coping better than others.
Given that March is the biggest month of the year for new car sales, this is going to be a devastating blow for the industry. April is inevitably going to be more of the same gloom, since the nationwide lockdown is unlikely to be lifted in time to allow any significant sales, and May is very much an unknown at this point.
This is going to have widespread ramifications for dealerships, in particular. Larger PLC dealerships may look at permanently closing some sites and some smaller business may simply not survive. It also comes at a difficult time for the car industry, which is grappling with a move towards online sales. This is very likely to accelerate that shift and similarly hasten the end of many new car showrooms across the country.
Will we see loads of pre-registered cars hitting the market?
Whenever sales take a sharp fall below expectations, car companies and dealerships tend to self-register a lot of cars to prop up their numbers, rather than leaving new cars unsold. This is because of the nature of the entire car industry ecosystem, where there are new cars continuing to arrive from factories every week that need to be sold and long lead times to ramp up or wind down production to match demand levels in any particular market.
This usually means extra service loan cars, demonstrator models, press vehicles, VIP loan vehicles and any other way that the industry can register cars and put them to good use. On top of that, they will simply register thousands of brand new cars in their own name and stick them in a field somewhere for three months to be sold as pre-registered used cars at a later date. That would mean these cars hitting used car forecourts sometime in summer.
In the current climate, many car companies and dealers certainly will have been self-registering thousands and thousands of vehicles in order to salvage their registration numbers, although across the entire industry it’s probably happened to the high degree we usually see when sales numbers take a tumble.
With almost all car factories shut down all around the world, there will be far fewer cars in the production pipeline for the next few months, which will have taken some of the pressure off dealers to clear their existing stocks before having to close their doors.
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