Eighth month of decline for new cars sales in UK as diesel pulls market down

05 December 2017

Eighth month of decline for new cars sales in UK as diesel pulls market down

5 December 2017

The UK’s new car market slide shows no sign of slowing down, as November once again saw a decline in registrations.

For the eighth consecutive month, figures released by the Society of Motor Manufacturers and Traders (SMMT) showed a market falling rapidly, with an 11.2% drop in sales compared to the same month in 2016. In total, 163,541 vehicles were registered, a large majority of these being either petrol or alternatively fuelled vehicles (AFVs).

The country’s new car market has been in decline since April when new vehicle excise duty (VED) rates were put in place by the UK Government. While the SMMT expected demand for vehicles to drop compared to record figures in 2016, it was forced to amend down its forecast in November, with expectations of a 4.7% overall fall in sales for the whole year.

However, while the double-digit fall is comparable to October’s 12.2% drop, the difference in the number of cars sold in November compared to October increased in 2017. During 2016, the difference between the two months was 3,933 vehicles, while this year saw 5,349 more vehicles sold, an increase of 1,416. This could partially be down to various ‘scrappage’ schemes introduced by manufacturers to take more polluting vehicles off the country’s roads and incentivise drivers into less polluting alternatives.

The figures are being dragged down by a decline in diesel demand, perhaps partially driven by the increase in VED which wiped out what was once an incentive to purchase vehicles powered by the technology due to their lower CO2 output. In November, the market for diesel declined by 30.6% compared to the same period last year, while petrol sales rose by 5% and AFVs by 33.1%, albeit on modest sales totals from 2016.

Business, fleet and private registrations all fell in the month, down 33.6%, 14.4% and 5.1% respectively. Registrations fell across all body types except specialist sports, which grew 6.7%. The biggest declines were seen in the executive and mini segments, which decreased 22.2% and 19.8% respectively, while demand in the supermini segment contracted by 15.4%.

Year-to-date figures reveal a total decline so far of 5%, with 2,388,144 vehicles hitting UK roads this year. Of these, diesel has seen an overall drop in its market share of 16.1%, while petrol has grown its share by 3.1% and AFVs by 34.6%. There are drops in the first 11 months across private, fleet and business sales, by 6.3%, 3.9% and 5.4% respectively.

Mike Hawes, SMMT chief executive, comments: ‘An eighth month of decline in the new car market is a major concern, with falling business and consumer confidence exacerbated by ongoing anti-diesel messages from the government. Diesel remains the right choice for many drivers, not least because of its fuel economy and lower CO2 emissions. The decision to tax the latest low emission diesel vehicles is a step backwards and will only discourage drivers from trading in their older, more polluting cars. Given fleet renewal is the fastest way to improve air quality, penalising the latest, cleanest diesels is counterproductive and will have detrimental environmental and economic consequences.’

A sign that the VED rates are affecting diesel sales can be seen in the used car figures released last month, which show a jump in the technology of 14% through Q3 2017. Under the new rates of duty, vehicles that were previously exempt from paying the annual charge can now face duty of around £140 (€158) per annum. This only comes in on vehicles registered after 31 March 2017, meaning used diesel can still enjoy the relaxed rates.

A further premium on diesel vehicle duty will be brought in for April 2018, after the Chancellor, Philip Hammond, announced for the first year of registration, all diesel cars would be placed in the next highest band, to drive more people to cleaner technology. However, the automotive industry has labelled this as confusing, insisting that modern diesels are cleaner than previous models, and asking why little has been done to penalise those vehicles instead.