New cars sales rise for first time this year

The number of new cars registered in the UK rose for the first time in seven months in July as pent-up demand saw drivers rush to dealerships.

New car registrations jumped by 11 per cent, according to data from the Society of Motor Manufacturers and Traders (SMMT), which tracks dealership activity.

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The rise is the first increase since December 2019 and comes after the new car market collapsed as a result of the UK-wide lockdown. At its worst, new car registrations fell 97 per cent, to their lowest level since 1946.

July’s figures represent a recovery from that position, particularly in a month which usually sees a slump in registrations. However, industry observers have warned that it is still uncertain times for the industry and July’s figures could represent a spike before demand trails off amid economic uncertainty.

UK new car registrations by model

Data: SMMT

The figures also don’t make up for an overall year-on-year fall of 42 per cent. SMMT is predicting a 30 per cent fall by the end of the year, equivalent to £20 billion in lost sales.

Private demand drove up July’s figures, with a 20 per cent increase and electric cars were the clear winner, with a 260 per cent year-on-year increase in fully electric vehicles registered. Hybrids also rose while petrol remained virtually unchanged and diesel continued to decline - by 26 per cent on July 2019.

Despite July’s shift towards EVs being part of a continuing pattern, they still account for just under five per cent of all new registrations - up from one per cent in 2019.

Mike Hawes, chief executive of the SMMT, said,“July’s figures are positive, with a boost from demand pent up from earlier in the year and some attractive offers meaning there are some very good deals to be had. We must be cautious, however, as showrooms have only just fully reopened nationwide and there is still much uncertainty about the future.

“By the end of September we should have a clearer picture of whether or not this is a long-term trend. Although this month’s figures provide hope, the market remains fragile in the face of possible future spikes and localised lockdowns as well as, sadly, probable job losses across the economy.”

Challenges ahead

James Fairclough, CEO of AA Cars, said the figures were encouraging but warned that there could be longer-term problems.

He said: “After months of falling sales, this uptick suggests two important trends in consumer attitudes. Firstly that there was pent-up demand during lockdown, and drivers are now acting on their desire or need for a new car.

“Secondly, it allays some fears that consumers would hold onto their cash and stay reluctant to spend, particularly on big ticket items such as cars.

“However, as encouraging as these figures are, there are many people who will be struggling financially as a result of the lockdown, and so there could still be some difficult months ahead.”

Dealers are beginning to recover from months of being closed (Photo: Shutterstock)

Alex Buttle, director of car selling comparison website Motorway.co.uk, said the market could shift towards second-hand cars in coming months.

He commented: "On a positive note, new car registrations are heading in the right direction. That said, it's likely a significant proportion of registrations last month were still buyers who had expressed an interest in purchasing a new car during lockdown and took their time to head to showrooms.

“Right now it’s the used car market where the real growth is taking place. Many buyers looking to change their cars at the moment don’t want to stretch their budgets with so much economic uncertainty swirling around.

"We’re likely to see this trend continue for the short to medium term as we enter a period of low consumer confidence coming out of the first wave of the pandemic, and with the looming threat of a second wave and a Brexit trade deal still not secured."

Online opportunity

Karen Hilton, chief commercial officer at heycar, said an uncertain period ahead offered opportunities for dealers who had been quickest to embrace digital methods. She commented: “Although the new figures seem to show some recovery for the industry, the sales are likely due to pent up demand from consumers in the early lockdown stages.

“As we enter a more uncertain Autumn trading period, the dealers and manufacturers that bounce back quickest are the most in tune with how consumer behaviour has changed during this period.

“Online research we commissioned with YouGov revealed that almost one in 10 of the British population who own a car are now more likely to buy a car online than before the pandemic, with over one in five admitting they’d buy a car online without ever seeing it in person.

“This adoption of a full online research and preparation phase for car buyers would never have accelerated so quickly had it not been for the pandemic. However, it’s behaviour that’s here to stay and dealers need to respond to grow their sales again.”