UK Car Sales Show Resilience Despite Economic Challenges
Despite the challenges posed by high interest rates and inflation, UK car sales have experienced a full year of growth, according to the Society of Motor Manufacturers and Traders (SMMT). The number of new cars registered in July 2023 grew by 28% compared to the previous year, marking the seventh consecutive month of growth. However, while this growth is significant, it is still below historical trends, and the outlook for next year has been downgraded.
The growth in July 2023 was particularly notable due to the contraction experienced in the previous year. In July 2022, new car registrations were at their lowest level in 16 years. The latest data from the SMMT indicates that supply chain issues, which had been a major concern during the pandemic, have improved, leading to increased production and the fulfillment of more orders.
A total of 143,921 new vehicles were registered in July 2023, the highest number since July 2020 when pent-up demand from the initial months of lockdown was unleashed. However, this figure is still below the average July sales of 168,000 between 2015 and 2019. Sales to individual consumers remain sluggish, with the growth primarily driven by company registrations and large fleet purchases.
Despite the recent growth, the tough economic conditions, including high inflation and interest rates, have led to a 0.7% downgrade in the expected number of vehicle registrations for 2024. Pantheon Macro, an economic research firm, predicts that car sales will only recover gradually for the remainder of the year and will likely remain 10% to 15% below pre-COVID levels.
Shift Towards Electric Vehicles
One positive trend in the UK car market is the increasing adoption of electric vehicles (EVs). The SMMT reported that one battery electric car was registered every 60 seconds in July 2023, with deliveries rising by 87.9%. Electrified vehicles, including hybrids, accounted for more than a third (35.4%) of the market.
However, the SMMT emphasized the need for accelerated growth in the EV sector to meet environmental targets. The UK government has set a goal to ban the sale of new petrol and diesel cars by 2030. While the growth in electric vehicle sales is significant, it must outpace the rest of the market to achieve these ambitious environmental targets. The SMMT also highlighted the installation of a record high of 3,056 new public chargers for electric vehicles, which will further support the adoption of EVs.
In conclusion, despite economic challenges, UK car sales have shown resilience and continued growth. The industry has overcome supply chain issues and witnessed a significant increase in electric vehicle sales. However, there is still room for improvement, particularly in accelerating the adoption of EVs to meet environmental goals. The outlook for next year remains uncertain, but for now, the UK car market remains on a positive trajectory.