Record 97.3% fall for UK new car market in April, but there are crumbs of comfort

Car showroom

The UK new car market fell by a massive 97.3% in April as coronavirus crisis shut showrooms, according to the latest data from the Society of Motor Manufacturers and Traders (SMMT).

Just 4,321 new cars were registered in the month as deliveries continued to frontline workers and organisations. Some 156,743 fewer than in April last year. The decline was the steepest of modern times, and is in line with similar falls across Europe, with France -88.8% down and the Italian market falling The latest SMMT outlook expects just 1.68 million new car registrations this year, the lowest since 1992.

Fleet orders represented by far the bulk of the market, taking 71.5% market share, equivalent to 3,090 units, while private buyers registered just 871 cars – a year on year fall of –98.7%.

But Christian Stadler, Professor of Strategic Management at Warwick Business School and an expert on the automotive industry, said there are some crumbs of comfort for the industry. “Oil prices are low and commuters may be more reluctant to use public transport after lockdown, which could encourage them to buy a new car, if they are no longer working from home.

“The fact that UK car sales have reached their lowest level since 1946 is not really surprising, after all we are in lockdown. A far bigger concern for car companies is that sales are unlikely to bounce back after the lockdown is eased.

“Demand for new cars was already falling before the pandemic and many people will feel less secure financially and more concerned about their jobs due to COVID-19. They may hold off buying a new car, especially with Brexit hanging over them as well. They might also feel less inclined to visit a car show room if social distancing measures continue.

“If demand remains low, manufacturers and their suppliers will lose the economies of scale that come from producing large volumes of cars and that will drive up costs, which they will be reluctant to pass on to customers.

“This comes at a very inopportune time for the industry, when companies have been investing heavily in electrification. It is likely there will be some job losses.

“Also, car companies are in a better position to weather this storm than they were the financial crash in 2008, when they had little money in the bank. Many car companies learned from that and have been careful to build up cash reserves, securities, and credit lines they can draw upon. VW has access to £47.5 billion, Daimler has £30 billion and PSA has £19 billion.

“We have also seen that Governments are willing to loosen their spending restrictions to support the economy during this pandemic. They may well be willing to offer some help to the car industry to protect jobs. After the financial crash we saw a car scrappage scheme to boost sales. While it wasn’t a complete success, it wouldn’t surprise me to see something similar this time, though some countries may seek to direct any support towards encouraging customers to buy electric cars.”

The niche battery electric vehicles sector saw a smaller percentage decrease of -9.7%, as some pre-ordered deliveries of the latest premium models were able to be fulfilled.

Despite showrooms being closed for the month of April, companies managed to support key workers, critical companies and frontline services. Meanwhile, the industry has continued to keep service and repair workshops open to maintain vehicles that are so crucial in keeping key services, goods and people moving safely across the country.

Wiltshire-based Mercedes-Benz commercial vehicle dealer group, Rygor Commercials has launched contactless van test drives to help businesses who still need to purchase vehicles during the current health pandemic.

Alan Weyman, van sales executive at Rygor, said: “The process for the customer is straight forward: after booking online via our website, we will confirm a date and time to pick the demo van up, or we will deliver out to them. Our demonstrator will be thoroughly cleaned and prepared with the relevant PPE before the customers drives the vehicle. To help limit contact even further, our team will get in touch via phone or video call after the test drive, to discuss how it went and help secure the right vehicle for the customer.”