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UK car market falls again in May

UK new car registrations fell 4.6% year-on-year in May, according to data released by the Society of Motor Manufacturers and Traders (SMMT). This is the third consecutive month of a contraction in new car demand in the UK and the greatest decline so far in 2019.

The ongoing weakness of the UK new car market comes as no surprise as the UK contends with ongoing uncertainty as its departure date from the European Union has been extended to 31 October and demand for diesel cars and plug-in hybrids (PHEVs) wanes. Furthermore, supply has normalised following the implementation of WLTP in September. Delayed car deliveries bolstered registrations and masked the underlying downturn in demand earlier in the year but this is no longer the case. Overall, new car registrations fell by 3.1% in the first five months of 2019 compared to the same period in 2018.

New car registrations weakened in all sales channels in May, with demand  from private consumers, fleets and business buyers declining by 5.0%, 3.0% and 29.0% respectively. Most new car segments experienced a fall in demand too, although executive and dual-purpose vehicles (SUVs) bucked the trend, with registrations growing 9.1% and 16.0% respectively.

Diesel and PHEV weakness

Registrations of new petrol-powered cars grew again in May, albeit by only 1.0%, and alternative fuel vehicles (AFVs) enjoyed an 11.7% increase year-on-year. However, this did not offset the 18.3% decline in demand for diesels, which was the 26th consecutive month of falling demand. The SMMT states that ‘ongoing anti-diesel sentiment and the forthcoming introduction of low emission zones continues to affect buyer confidence. However, thanks to significant industry investment in new technology, the latest diesels are safer and cleaner than ever before and will not face charges or restrictions anywhere in the UK.’

As far as AFVs are concerned, demand for petrol-electric hybrids grew 34.6% year-on-year, to 7,785 units, and battery electric vehicles (BEVs) recorded a significant rise of 81.1% in the month. Nevertheless, BEVs still only captured 1.1% of the new car market in May and 0.9% in the first five months of 2019, according to the latest detailed AFV registrations data released by the SMMT.

Demand for plug-in hybrids (PHEVs) plummeted by 40.6% in May and was 25.1% lower than in the first five months of 2018. The SMMT highlighted that this ‘is further evidence of the removal of the purchase incentive for PHEVs.’

Despite the falling demand for PHEVs, the UK Government will not reinstate the incentive. An updated grants package released last year by the UK Government means only battery electric vehicles (BEVs) now qualify for a £3,500 (€3,985) subsidy. Prior to that, grants had ranged from £2,500 to £4,500 (€2,847 to €5,124) depending on the distance a vehicle could travel on electric power only.

Mike Hawes, SMMT Chief Executive, said, ‘Confusing policy messages and changes to incentives continue to affect consumer and business confidence, causing drivers to keep hold of their older, more polluting vehicles for longer. New cars are safer, cleaner and more advanced than ever and, with sophisticated safety, efficiency and comfort features as well as a host of attractive deals on offer, there has never been a better time to invest in a new car.’