January rise in UK new car sales marks 6th consecutive month of growth

The UK new car market grew 14.7 per cent in January to reach 131,994 units, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT), setting the tone for an anticipated countercyclical year of growth. This was the best start to the year since January 2020’s pre-Covid 149,279 units and is the sixth successive month of expansion.

Electrified vehicles notably drove the increase, as manufacturers continue to bring ever more choice to the market despite ongoing strains on the supply chains. Hybrid electric vehicles (HEVs) comprised 14.4 per cent of new car registrations, increasing volumes by 40.6 per cent. Meanwhile, battery electric vehicle (BEV) registrations rose 19.8 per cent to reach 17,294 units, or 13.1 per cent of new registrations – slightly below the average recorded for 2022. Plug-in hybrid vehicles (PHEVs) recorded a 0.7 per cent rise, although their share fell to 6.9 per cent of new cars reaching the road. As a result, one in five new cars registered in the month came with a plug.

It was also a strong month for large fleet registrations, which increased by 36.8 per cent to 69,540 units, while registrations by private buyers fell by -4.3 per cent to 59,639 units – reflecting some easing of supply and evidence of how shortages last year distorted market performance. Registrations by businesses, the smallest segment at 2,815 units, rose by 45.6 per cent.

Plug-ins are anticipated to comprise more than one in four new registrations this year, representing growth of 32.1 per cent or approximately 487,140 units, and almost a third (31.0 per cent) of the market in 2024 at 607,150 units. However, the rollout of infrastructure needed to charge them is failing to keep pace.

During Q4 2022, the ratio of new chargepoint installations to new plug-in car registrations dropped to one for every 62 – a significant fall compared with the same quarter last year, when the ratio was 1:42. As a result, in 2022, one standard public charger was installed for every 53 new plug-in cars registered, the weakest ratio since 2020. Mandating rollout targets for infrastructure and regulating service standards would give drivers certainty they can always find a working, available charger. Infrastructure must be built ahead of demand else poor provision risks delaying the electric transition.

More immediately, the upcoming Budget is an opportunity to implement measures that support the transition. Reducing VAT on public chargepoint use from 20 per cent to 5 per cent in line with home charging would ensure more affordable access for all and underpin a fair net zero transition. Government should also review proposals to graft a Vehicle Excise Duty regime designed for fossil fuel cars onto zero emission vehicles (ZEVs). The higher production costs associated with electric vehicles means that currently more than half of all available BEVs would be subject to the expensive car supplement due to apply to ZEVs from 2025. While it is right that all drivers pay their fair share, existing plans would unfairly penalise those making the switch, and risk disincentivising the market at the time when EV uptake should be encouraged. Government should also tackle other fiscal blocks to uptake by raising recommended business mileage rates.

Commenting on the figures, Mike Hawes, SMMT chief executive, said, “The automotive industry is already delivering growth that bucks the national trend and is poised, with the right framework, to accelerate the decarbonisation of the UK economy. The industry and market are in transition, but fragile due to a challenging economic outlook, rising living costs and consumer anxiety over new technology. We look to a Budget that will reaffirm the commitment to net zero and provide measures that drive green growth for the sector and the nation.”

The strong start to the year is mirrored in the latest market outlook, which anticipates 1.79 million new car registrations in 2023, an 11.1 per cent increase on the past year but still well below 2019 levels. This also represents a -0.8 per cent reduction on October’s outlook, against a weak economic backdrop. However, a further 9.3 per cent increase is expected next year, with 1.96 million new cars expected to join the road in 2024.

NFDA reaction

Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), which represents franchised car and commercial vehicle retailers in the UK, broadly welcomed the SMMT figures, saying: “It is encouraging that sales of new cars have risen in January and we have started the year in a strong position. Electric vehicles experienced significant growth and is driving the industry in the right direction. NFDA is confident that this trend will continue as supply constraints begin to ease and customer lead times start to fall.

“It is important that the transition to zero emissions continues to be supported by investments in the charging infrastructure and financial incentives for EV buyers and this has recently been addressed in NFDA’s Spring Budget 2023 submission.”

Robinson added a note of optimism, saying: “Throughout 2023, we are confident retailers will continue to show their resilience and ability to meet buyers’ demand with growing footfall levels in showrooms and an ever-improving online offering from dealers”.