UK passenger car demand flat in July

04 Aug 2016 IHS Markit Automotive Expert

In the first full month after the Brexit vote, registrations in the UK passenger car market have been flat during July

IHS Automotive perspective

  • Significance: Demand has been flat in the UK passenger car market during July, as registrations have grown by just 0.1% y/y.
  • Implications: July was the first full month after the country voted to leave the EU. There appears to have been little impact from this as yet, particularly as IHS Automotive already anticipated growth slowing in the second half of the year after a record-breaking performance in recent times and two fewer working days.
  • Outlook: Brexit will become a growing factor in the market place in the coming months. Although we still expect the full year to record a gain of around 1% y/y, setting another record in the market, we now expect steeper declines in 2017 and 2018.

The UK passenger car market has flattened during July, according to the latest data published by the Society of Motor Manufacturers and Traders (SMMT). Total sales this month have grown by just 0.1% year on year (y/y) to 178,523 units. From a customer type perspective, a key reason for this fall back has been private buyers, registrations by which have fallen by 6.1% y/y to 72,727 units. However, this was offset by a 5.0% y/y improvement in fleet registrations to 99,124 units while registrations by business customers has grown by 1.9% y/y to 6,672 units. The flat month has eroded the rate of registration gains in the year to date, although this remains on an upswing with an increase of 2.8% y/y to 1,599,159 units.

Ford remained the largest OEM in the UK during July, although it suffered a decline of 7.8% y/y during the month to 22,247 units. Its key models were the B-segment Fiesta in top spot with 7,990 units registered, while the C-segment Focus registered 4,911 units in fourth place. Ford's performance during the month did not help its YTD; despite leading with registrations of 193,439 units, it is now down by 3.9% y/y. General Motors' (GM) Vauxhall brand in second place had a far stronger month, with registrations up by 16.8% y/y to 19,733 units. The second-placed B-segment Corsa registered 5,606 units, the C-segment Astra put in a far stronger month with 4,939 units registered in fourth place, and the sub-compact Mokka crossover stood in eighth with 3,321 units. However, Volkswagen (VW) brand contracted by 9.5% y/y during July to 14,038 units, despite the C-segment Golf registering 4,519 units in sixth place and the B-segment Polo in seventh with 4,112 units.

Outside this top group, the Mercedes-Benz brand was the biggest seller in fourth place with 11,650 units registered, an increase of 15.0% y/y, which has been underpinned by the popularity of the Mercedes A-Class and C-Class, which were the ninth and tenth largest selling models in the country during July. It was a mixed month for other premium brands in the market though. Audi's registrations declined by 10.9% y/y to 11,582 units, while BMW has recorded an increase of 3.4% y/y to 9,699 units. New models and deals have helped to lift the local Land Rover and Jaguar brands by 73.0% y/y to 4,882 units and 10.5% y/y to 2,639 units, respectively.

Mainstream brands have had a mixed month though, with some OEMs - Skoda, Toyota, Citroën and Renault - all seeing double-digit percentage declines. However, Kia bucked this trend as its registrations jumped by 26.6% y/y, possibly benefiting from the latest-generation Sportage compact crossover.

Outlook and implications

July is the first full month of passenger car registrations published for the UK market since the country voted to leave the European Union (EU) on 23 June. However, there is little to suggest that this easing is directly related to this situation as yet. Indeed, there are a multitude of other factors that are likely to be more at play at the moment. This includes the sheer scale of demand that there has been in the market during the past few years, with only two months of decline recorded during the past 53 months; and record sales during 2015. Indeed, IHS Automotive expected some easing during the second half of 2016 even prior to the referendum. Furthermore, many of those vehicles registered will have been ordered before the vote, particularly those to fleets. It should also be taken into account that this month had two fewer working day than July 2015 - 23 days versus 21 days. When this fact alone is taken into account, the market could have improved around 9.5% y/y, all things being equal.

That is not to say that no impact from the vote is to be expected, it is more that it will take a little longer to come into effect. Indeed, major economic and political uncertainty will persist for some time, weighing down on business and household confidence and behaviour, and thereby dampening investment, employment, and consumer spending. Certainly there have already been weaker results from the surveys conducted by IHS Markit during July. Weaker asset markets and tighter credit conditions are anticipated to further hamper UK growth, while the housing market could suffer a marked downturn. The pound sterling has fallen sharply following the Brexit vote, and although this should help UK exports, it will probably push up inflation, thereby squeezing consumer purchasing power and lifting companies' input costs. This factor may also make imported vehicles more costly, with some OEMs already suggesting that they are considering this, although given the competitiveness of the market they appear to be waiting for someone to make the first move. As a result of the vote, IHS Markit has lowered its GDP growth forecasts to 1.6% (from 1.9%) for 2016, 0.2% (from 2.4%) for 2017, and 1.3% (from 2.3%) for 2018.

IHS Automotive forecasts that passenger car demand in this market will hold on to much of the gains built up so far this year, and end 2016 up by 1.1% y/y at 2.66 million units, another new record. However, it could be that September - one of the two big selling months of the year due to the biannual age-related number plate change - will prove to be a litmus test for the impact that Brexit will have on the market, although some customers - particularly fleet customers - may also try to take advantage of lower price vehicles while they last. For now, we anticipate a steeper downturn than originally anticipated for 2017, with a fall of 9.2% y/y to 2.42 million units, while in 2018 we see demand hitting around 2.37 million units.

About this article

The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.


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