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The UK passenger car market went into retreat again in October,
according to the latest data published by the Society of Motor
Manufacturers and Traders (SMMT). Registrations reached 143,251
units during the month, a decline of 6.7% y/y. The fall was largely
the result of a 13.2% y/y decline in private registrations to
60,083 units, compounded by a 30.3% y/y drop in registrations among
business customers to 3,256 units. This was partly offset, however,
by a 0.3% y/y improvement in fleet registrations to 79,912 units.
Last month's performance exacerbated the year-to-date (YTD)
decline: registrations shrank by 2.9% y/y during the first 10
months of 2019 to 2,005,522 units.
The data released for October show that the shift away from
diesel continued during the month. Registrations of this fuel type
fell by 28.3% y/y to 34,666 units, to take just 24.2% of the
market. By contrast, gasoline (petrol) sales fell by "only" 3.2%
y/y to 89,371 units, and this fuel type now has a market share of
62.4%. There is growing demand for electrified alternatives. The
increased availability of mild-hybrid electric vehicle (MHEV)
technology has boosted sales of such vehicles: registrations of
gasoline MHEVs grew by 8.7% y/y to 1,732 units last month, while
registrations of diesel MHEVs jumped 378.1% y/y to 3,251 units.
Traditional hybrid powertrains had a strong month, posting a gain
of 28.9% y/y to 7,950 units. New models helped to boost sales of
battery electric vehicles (BEVs) during the month by 151.8% y/y to
3,162 units, while the plug-in hybrid category has started to shrug
off the changes to the UK government's Plug-in Car Grant (PiCG)
that were enacted from October 2018, although it still slid by 1.7%
y/y to 3,119 units last month.
Outlook and implications
Like many EU markets, the UK passenger car market has been hit
to some extent by the shift from NEDC to WLTP testing at the
beginning of September 2018. However, unlike the majority of EU
markets last month, the UK market was unable to grow from its low
base of comparison (albeit more modest than for some markets), and
in fact found itself in an even worse position. Part of the reason
for this seemed to be consumer uncertainty, reflected by the
decline in the number of private customers entering the market in
October. There are a number of causes of this uncertainty. From a
product perspective, there are increasingly fewer reasons to
consider buying a new diesel car - despite the introduction of new
technologies - particularly as it appears as though cities are
looking to clamp down on their usage in certain areas . At the same
time, there have been political and Brexit-related concerns,
especially during the past month. Despite the agreement of a
revised deal with the EU over the UK's departure from the bloc, a
31 October 2019 exit date has now been extended until 31 January
2020. In the interim, a general election has been called for 12
December, although it is difficult to know whether this will
provide any greater clarity, particularly as some of the smaller
political parties may end up having some influence over the final
outcome.
For now, IHS Markit expects the UK passenger car market to
register around 2.29 million units in 2019, a decline of 3.1% y/y
and a 15% drop compared with the recent peak reached during 2016.
We expect the market to bottom out during 2020 at almost 2.23
million units before slowly improving again in 2021. However, our
forecast assumes that the UK will eventually ratify an EU
withdrawal agreement, launching a transition period during which it
will temporarily remain part of the trading bloc. Beyond this
transition period, we assume a free-trade arrangement for goods and
access to the single market for some UK services based on
equivalence.
Posted 06 November 2019 by Ian Fletcher, Principal Analyst - AutoIntelligence, Automotive, IHS Markit
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