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UK passenger car market tumbles 15.6% y/y during "Big March"

05 April 2018 Ian Fletcher

Passenger car registrations in the United Kingdom have tumbled by 15.7% year on year (y/y) during the age-related number plate change month of March.

IHS Markit perspective

  • Implications: The rate of decline has not been helped by the high base of comparison caused by record-breaking sales levels being achieved a year ago as customers prepared for changes in vehicle excise duty (VED). Furthermore, working day factors related to the timing of Easter are also unlikely to have helped matters in an already declining market.
  • Outlook: Looking forward to the rest of 2018, IHS Markit sees little let-up in the general decline with a fall in passenger car sales of 4.0% y/y forecast to 2.44 million units. Furthermore, we see additional falls taking place in 2019, before an upswing begins in 2020

The UK passenger car market has fallen by 15.7% year on year (y/y) during March, which is traditionally one of the two biggest sales months of the year thanks to the age-related number plate change. According to the latest data published by the Society of Motor Manufacturers and Traders (SMMT), registrations fell from 562,337 units to 474,069 units. Registrations across all customer categories fell significantly. Registrations by private customers fell by 16.5% y/y to 228,623 units, while those by fleet customers retreated by 15.0% y/y to 222,595 units. Furthermore, registrations by business buyers were down by 14.3% y/y to 22,851 units.

The decline in top-line registrations this month has led to demand in the first quarter of 2018 falling by 12.4% y/y to 718,489 units.

The data for the month also showed further evidence of the backlash against diesel passenger cars in the wake of the negative political commentary and media coverage as well as confusion related to the future of this fuel type. Diesel's market share stood at 32.4% this month, versus 43.5% during March 2017, and was a fall of 37.2% y/y in volume terms. By comparison, the share of gasoline (petrol)-fuelled passenger cars during the month has grown from 52.4% to 62.5%, which was also an increase in volume terms of 0.5% y/y. There has also been a rise in alternatively fuelled passenger cars during March, with the total number of hybrid, plug-in hybrid, electric vehicles (EV) and others rising by 5.7% y/y to 24,126 units. However, the overall market share remains just 5.7%.

Ford led the way on a brand basis this month, with registrations of 50,257 units. However, this was down by 30.0% y/y. The brand had the biggest selling model was the latest-generation Fiesta which sold 19,272 units, although this was a fall of 24.2% y/y. The Focus, the next generation of which is set to be shown next week, stood in fifth with 9,403 units registered, a decline of 45.1% y/y. Its popular Kuga crossover ended the month in sixth with registrations of 8,964 units, although this had dipped by 6.2% y/y.

The second biggest selling brand in March was the Volkswagen (VW) brand which nosed ahead of Groupe PSA's Vauxhall brand, with sales of 37,843 units, although this was a dip of 4.2% y/y. Its performance was helped by the Golf, registrations of which grew by 29.1% y/y to 13,966 units, as it took second in the monthly model chart. However, its formerly popular Polo has dropped out of the top-ten brand chart altogether this month as it transitions to a new generation.

Vauxhall in third recorded another steep fall of 20.5% y/y to 37,023 units. Corsa registrations fell by 27% y/y to 11,718 units, while the Astra dropped out of the top-10 model chart again this month.

The three German premium marques occupied the next three spots in the brand chart. Mercedes led this group in fourth with registrations of 33,194 units, although this was a decline of 7% y/y, as C-Class registrations retreated by 24.5% y/y to 7,155 units, while the Mercedes A-Class sold 7,184 units. BMW registered 31,649 units, a fall of 9.2% y/y, while Audi dipped by 2.9% y/y to 29,968 units.

Nissan had a particularly hard month, with its registrations falling by 33.5% y/y to 24,561 units. This is despite its Qashqai compact crossover retreating by "only" 12.5% y/y to 12,018 units, to be the third most popular this month. The only gain among the top-10 best-selling brands this month has been Hyundai, which increased 0.4% y/y to 18,526 units.

Outlook and implications

While the rate of decline is particularly steep this month in a falling market, there are a number of factors which will be compounding this situation. One key factor is the high base of comparison. While March is already a significant month in terms of volume, this was exacerbated during March 2017 by customers racing to beat changes to vehicle excise duty (VED) and new car surcharges that took place the following month that includes alternative fuel and electric vehicles (EV). Furthermore, there were two fewer working days - 21 days versus 23 days in March 2017 - partly due to Easter falling at the end of the month which is unlikely to help matters. In addition, the country suffered some unseasonably bad weather during the month which may also have put off potential customers.

However, other factors which may have helped the market do not seem to have come in to play. The most notable of these being a pull forward of diesel passenger car registrations prior to an adjustment in their tax rate at the beginning of April. It seems that the tide has very much turned against this technology, and it remains to be seen whether the introduction of diesel vehicles eligible for the reduced rate will make any difference to this trend when they are finally launched.

Nevertheless, the trend in the passenger car market is one of retreat after a long period of sustained gains that led to record breaking annual registrations. The situation is not being helped by moderating economic performance. The Office for National Statistics (ONS) revised UK GDP growth down to 0.4% quarter on quarter (q/q) for the fourth quarter of 2017 in a second estimate, while y/y growth slowed to 1.4% during the same timeframe, the weakest performance since mid-2012. Furthermore, the economy grew 1.7% in 2017 as a whole, a reduction from the 1.9% recorded in 2016, 2.4% in 2015, and 3.1% in 2014. Nevertheless, IHS Markit has maintained its 2018 and 2019 projections at 1.4% and 1.5%, respectively. This reflects the recent progress made in Brexit talks. Downward pressure remains though, such as accumulating pressures on consumers' spending intentions, led by inflation outstripping earnings growth, as well as ongoing uncertainties over Brexit despite the progress that has been made. In addition, there is the expectation that the Bank of England will raise its policy rate during 2018, which could raise the pressure on consumers further.

Looking forward to 2018, IHS Markit sees little let-up in the decline with a fall in passenger car sales of 4.0% y/y forecast to 2.44 million units. Furthermore, we see additional falls taking place in 2019, before an upswing begins in 2020.

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