Sunday, July 3, 2022

Rising cost of living may impact car sales, say experts

Manufacturers are having a difficult time of it of late and figures from the Society of Motor Manufacturers and Traders (SMMT) show that the automotive industry is not immune to the problem.

Despite March normally being a bumper year due to new car registrations, the industry saw the weakest sales since March 1998, with new car sales slumping to 243,479 units, a drop of 14.3%.

Manufacturers had reported robust order books during the first quarter, but ongoing supply chain shortages continued to squeeze supply during what is normally the industry’s busiest month as buyers demand the latest numberplate.

This is, therefore, the weakest March since 1998, which was prior to the introduction of the two-plate system. Given around 20% of total annual registrations are usually recorded in March, the result is massively disappointing for the sector and underscores the long-term impact the pandemic is wreaking on the industry. In spite of the rollback of pandemic restrictions, which limited the industry to ‘click and collect’ in the first part of 2021, overall Q1 registrations for 2022 were down -1.9%.

Richard Peberdy, UK Head of Automotive, for KPMG comments : “It was widely anticipated that the automotive sector would take most of 2022 to sufficiently increase component capacity and put an end to the supply shortages that have limited car production during the pandemic.

But the implications of war in Ukraine and heightened restrictions in China add further complexity and exacerbate this challenge.

“Whilst supply shortages persist, production volumes will remain lower than pre-pandemic, and car makers will continue to focus on higher margin models, as well as the electric vehicles market.

Up until now, this has kept forecourt sales relatively healthy, and also driven up prices of used cars.  But the rising cost of living poses significant questions about whether consumers will delay, or even curtail, larger investments, such as on a car.  The coming months will tell.”

Mike Hawes, SMMT Chief Executive, says,March is typically the biggest month of the year for the new car market, so this performance is deeply disappointing and lays bare the challenges ahead. While demand remains robust, this decline illustrates the severity of the global semiconductor shortage, as manufacturers strive to deliver the latest, lowest emission vehicles to eagerly awaiting customers.

Placing orders now will be beneficial for those looking to take advantage of incentives and lower running costs for electric vehicles, especially as the Ukraine crisis could affect supply still further. With increasing household and business costs, government must do all it can to support consumers so that the growth of electric vehicles can be sustained and the UK’s ambitious net zero timetable delivered.”

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