Optimistic reactions to January car sales figures

Despite the gloomy January figures, there are signs of optimism in the UK car industry. Sue Robinson, Chief Executive of the National Franchised Dealers Association (NFDA), which represents franchised car and commercial vehicle retailers in the UK, said that the steep fall in sales was expected as a result of the January lockdown, but she went on: “Retailers are optimistic about the year ahead, provided that dealerships will be allowed to reopen as soon as it is safe to do so.”

Robinson added: “Franchised dealers continue to offer ‘click & collect’ and deliveries to customers, and aftersales servicing to keep key workers on the road, however, there is a proportion of consumers waiting for dealerships to reopen and holding off their vehicle purchases due to the current restrictions. Showrooms have spacious areas and dealers can work by appointment, ensuring the safety of customers and staff.

“Positively, sales of electrified vehicles have begun the year with a strong performance and with more models coming to the market, the improvement to the charging infrastructure and retailers investing heavily to inform their customers, sales of EVs will continue to grow.

“Despite the lockdown, the automotive retail sector is looking at 2021 with confidence as sales will likely be fuelled by pent-up demand, rising registrations of low and zero emission vehicles and the increasing importance of car ownership, which is seen by more and more people as the safest mean of personal transport in the present climate”.

Michael Woodward, UK automotive lead at analyst Deloitte, echoes this sense of optimism. He says: “With potential buyers unable to visit showrooms, click-and-collect has offered a valuable lifeline to dealers, alongside the more profitable businesses that most operate, such as MOT servicing and repairs.”

Woodward believes that a recovery is in sight, saying: “Whilst there is considerable uncertainty within the industry, early indications point towards a recovery in the second half of the year once lockdown restrictions have eased.

“The extension of some major government and private sector income-support measures, such as the furlough scheme and payment holidays on loans, mortgages and credit cards, has boosted consumer confidence in personal finances. Increased personal savings, as a result of fewer opportunities to spend, also point to favourable conditions for renewed consumer activity which could unleash pent-up demand.

“Year-on-year sales results are typically a marker of performance but, with sales at record lows throughout 2020, growth is inevitable. Understanding the context of this will be key to gauging the health of the industry in 2021.”

However, the outlook for manufacturers is less bright, as Woodward points out:  “The path to recovery for manufacturers is less clear. Last year car production in the UK fell by a third, slumping to the lowest level since 1984.

“This output decline has been compounded so far this year by supply chains and a shortage of semi-conductors, forcing some factories to temporarily halt production. With around 3,500 chips in a hybrid EV, compared to about 1,300 in a normal petrol or diesel vehicle, carmakers have been caught out by the growth in demand for EVs alongside electrical items, like tablets. For some manufacturers, this current shortage of chips means production plans may need to pivot.”

Having said that, he believes that EVs hold out hope for the industry. He says: “Continuing on from last year’s success, EVs entered 2021 on a high with sales of battery electric vehicles (54 per cent) and plug-in hybrids (28 per cent) achieving a combined market share of 14 per cent, continuing to exceed diesel’s share of the market (12 per cent).

“EVs are becoming an increasingly viable option for consumers, many of whom are influenced by financial incentives as well as climate and emissions concerns. However, for EVs to integrate further into everyday life, greater accessibility to charging points is still required. Ensuring a joined-up approach and continued investment in the infrastructure is key to support growing demand.”