Global Auto Demand Tracker from IHS Markit: Rolling updates of new sales/registration numbers in June show stabilis… https://t.co/JnqBIZoKLr
UK passenger car demand slides in uncertain March 2019
Passenger car registrations in the UK have weakened again during March, according to the latest data published by the Society of Motor Manufacturers and Traders (SMMT). In what is one of the biggest sales volume months of the year, registrations retreated by 3.4% year on year (y/y) to 458,054 units. This has resulted in registrations in the first quarter now reaching 701,036 units, a decline of 2.4% y/y.
Private sales were a contributor to the fall this month, with a decline of 2.8% y/y to 222,115 units, while business customer registrations sank by 44.8% y/y to 12,651 units. However, fleet registrations improved slightly, gaining by just 0.3% y/y to 223,288 units.
The data during this important month has further underlined the recent swing away from diesel passenger cars. In March, registrations of such vehicles tumbled by 21.4% y/y to 120,677 units, with its market share falling from 32.4% to 26.3%. By contrast, gasoline (petrol) passenger car registrations grew 5.1% y/y to 312,075 units, taking the share of such vehicles from 62.6% to 68.1%. Furthermore, alternatively fuelled passenger cars during the month have increased by 7.6% y/y to 25,302 units
Outlook and implications
While February saw a modest improvement in UK passenger car registrations, March is a far better indicator of the health of the local market given that the age-related number plate change helps bring those considering a new car in to the market. However, March has been beset by further uncertainty. While the SMMT points to the continuing confusion over the future of diesel, the issue that has led the headlines that month and those leading up to it has been the UK's departure from the European Union (EU). This was scheduled to take place on 29 March at the end of the two-year Article 50 period. However, the ongoing debates and disputes related to Prime Minister Theresa May's deal within both government and the House of Commons has resulted in a short-term delay. Nevertheless, this has not diminished the threat of a no-deal Brexit greatly, despite the House of Commons voting by a majority of one last night (3 April) to back a bill further extending the Brexit process. Indeed, the EU is the only body that can grant an extension, and with European parliamentary elections taking place in May, it has already warned that this would need to be far longer than that which has been asked for so far. It also may not be willing for the UK to be involved in the elections.
The uncertainty of this process has led to the reduction of IHS Markit's current real GDP forecast for this market to 0.8% in 2019, as it is close to stagnation in the first quarter of the year, and 1.0% in 2020, with the risks remain overwhelmingly on the downside. This is in line with the fragile business climate, which show a continued squeeze on industrial investment plans, malaise increasingly affecting the service sector and less supportive labour market conditions. Our projections for the next couple of years also reflect a less assured outlook for UK households, consisting of high domestic energy prices and increasing pressure on personal finances as a result of past real disposable income losses, a historically low savings rate, and high credit levels.
For now, IHS Markit's current passenger car registrations forecast reflects the UK going through an orderly departure from the EU. We now expect demand to fall by around 4.2% y/y during 2019 to 2.27 million units, or around 15.8% below the record of 2.69 million units reached during 2016 when a recent cycle peaked. However, we also expect the market to start recovering next year before regaining pace in 2021 and beyond.
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