‘Great relief’ but recovery ‘might be slower’ than expected – analysts on car sales

Car registration figures may offer some relief for the embattled sector, but analysts have warned the recovery might be slower than first hoped. Andrew Burn, managing director and head of automotive at Interpath Advisory (formerly KPMG Restructuring), said of the May SMMT registration figures: “The latest registration figures will come as great relief to the sector given the tumultuous challenges it is grappling with. The numbers reflect the first full month of showroom openings, with volumes back to circa 2012 levels.  The question now is where volumes will settle once we have moved beyond the pandemic and the new norms are established.

“Ignoring the like-for-like monthly comparisons given the potential distortions in the data, pure electric and petrol mild hybrids seem to be continuing to gain traction. What is unclear is whether this is being driven by consumer demand or the impact of the ongoing semiconductor challenges, and whether these models are being preferred by the manufacturers in order to drive structural change in the sector. In reality, I suspect it to be a combination of the two.”

Deloitte – “Recovery might be slower than first thought”

Jamie Hamilton, automotive director and head of electric vehicles at Deloitte, said: “With showrooms open for the whole month, and with both business and consumer confidence on the rise, it is disappointing to see that sales of new cars failed to return to pre-pandemic levels in May. Today’s figures suggest that the expected post-lockdown recovery might be slower than first thought.

Semi-conductor shortages continue to bite

“The ongoing global shortage of semi-conductors means that there is little respite for the sector and disruption is expected to last at least through to the end of the year. Manufacturers have responded so far by employing a variety of tactics to minimise both near- and long-term damage. This includes shifting assembly to more in-demand products, bypassing the installation of some parts and modules until a later date, and securing alternative sources of semi-conductor supply.

“Some manufacturers are struggling to meet consumer demand and, in some cases, are significantly reducing production forecasts, cutting hours, and even idling factories.

“For dealerships, stock is visibly low for some and consumers themselves are also feeling the impact, waiting longer than usual for delivery of their new vehicles. As a result of delays, some consumers are now turning to the used car market, but stock is also an issue here so it is no surprise that we have seen the value of used cars grow significantly over the last month.

EVs continue to outperform the market

“Electric vehicles continued to see significant growth in May, with battery electric and plug-in-hybrid achieving a combined 15 per cent market share (8 per cent and 6 per cent, respectively). This put them ahead of pure diesel yet again, which captured just 10 per cent of the market.

“Almost a quarter of cars produced in the UK are now electric in some form, demonstrating the demand for ultra- low and zero emission vehicles. As this figure rises, we expect to see increasing calls for battery production to come to the UK. The majority of the world’s batteries are currently produced in Asia, but any cost of transportation reduction would be welcomed by many UK manufacturers.

“Although future EV growth is almost guaranteed, the rate required to achieve 100 per cent penetration by 2030 will only happen if consumer concerns about charging infrastructure are put to rest. Many will find reassurance in the investment recently announced by the government towards rapid charging. However, there still needs to be a longer term strategy in place, to encourage consumers to go fully electric.”