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sancho panza

Carmageddon in the UK: Auto Sales Plunge 12% in 2 Years, Diesels in Death Spiral. Consumers, Businesses, Fleets Cut Back

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https://wolfstreet.com/2019/01/07/uk-auto-sales-plunge-second-year-in-a-row-diesels-in-death-spiral-consumers-businesses-fleets-all-cut-back/

This is getting serious.

Sales of new passenger vehicles, as measured by registrations, dropped 5.5% in December from a year earlier in the UK, the second largest auto market in the EU, behind Germany. Sales in the full year of 2018 dropped 6.8%, “reflecting 12 months of turbulence,” and “the ongoing decline in consumer and business confidence,” according to the Society of Motor Manufacturers and Traders (SMMT).

But in 2017, sales had already dropped 5.7% from 2016; and over the two-year period, sales were down by 12%. This chart shows the year-over-year change in new vehicle registrations:

UK-auto-sales-2018-12-change-YOY-.png

Sales fell for all three customer types: to consumers (-6.4%), to fleets (-7.3%), and to businesses (-6.4%). A lease counts as a registration because the leasing company buys the vehicle and leases it to the customer, at which point the vehicle is registered.

Sales in 2018 fell to 2.367 million new vehicles, as measured by registrations. This was the lowest level of sales in four years, and below 2014 sales (2.476 million):

UK-auto-sales-2018-12-total.png

And diesel sales have collapsed. In 2018, they plunged 29.6%, after having already plunged 17.1% in 2017. Since their peak in 2016 (1.29 million), diesels sales have dropped 42%, to just 750,165:

UK-auto-sales-2018-12-diesels.png

Demand fell across all vehicle categories except the “dual purpose” category (definition) which is close to SUVs in the US. Sales in that category jumped by 9.1% in 2018 to reach a market share of 21.1%.

Sales of superminis fell by 2.4% and sales of lower medium cars plunged by 9.4%. But small vehicles remain the bestsellers in the UK, unlike the US, whose sales are dominated by compact SUVs, pickups, and SUVs. According to the SMNT, smaller cars have a combined market share of 58.7%.

Below are the best sellers in the UK (table via SMMT). Note the #1 bestseller in the UK, the Ford Fiesta. In the US, Fiesta sales surged nearly 12% in 2018 (which is quite something given that overall car sales, unlike truck sales, have been plunging for years). But Fiesta sales in the US were tiny, just 51,730 vehicles in a market that is over seven times the size of the UK market; and they accounted for only 2.1% of Ford’s total US sales:

UK-auto-sales-2018-12-bestsellers-2.png

There was strong growth in sales of battery-electric vehicles (EVs) in 2018 (+13.8%) and plug-in hybrid electric vehicles (+24.9%), but their combined market share was still only around 2.5%, and they just didn’t make enough difference; and there was strong growth in sales of gasoline powered vehicles (+8.7%).

This shows that many individuals, fleets, and businesses that were driving an older diesel vehicle replaced it with a vehicle with a different powertrain. But this switch was not enough to make up for the plunge in diesel sales. This brings up a more generic economic problem: It seems consumers and businesses have been backing off replacing their vehicles over the past two years, and are keeping their existing rides longer, which is the bane in the auto industry.

There are plenty of reasons for the steep decline in the UK auto market. This includes consumer aversion to diesels in Europe generally, and tepid consumer and business demand more broadly in the UK – likely a mix consisting of the uncertainty surrounding Brexit, economic cycles with their ups and downs, and broader disaffection among consumers and businesses for spending money on cars.

But the UK is not unique in the world – and blaming the uncertainty around Brexit exclusively will not do. Auto sales in the largest market in the world, China, ran into a buzz saw in 2018. The second largest market, the US, peaked in 2016, and sales have been tapering off. In Germany, registrations droppedtoward the end of 2018, driven by declining commercial sales, and year-total registrations edged down 0.2%. So clearly, there is a broader theme: Global demand for new vehicles just isn’t what it used to be – and this is another piece of the puzzle.

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I know I might not be very representative of the entire population, having no debt and usually driving the same car for years (currently on 2008 Hyundai i30), but one of the reasons I'm putting off the decision to buy something new is that there's a feeling that a proper EV might be just a few years away. An affordable family car with solid range and acceptable charging times, probably based on a solid-state battery. Think Hyundai Ioniq, if it could do 400 real-world miles and charge to 80% in under 10 minutes.

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The 'new car registrations' graph shows the story:

UK-auto-sales-2018-12-total.png

There was a bit of a peak in sales over the last few years, and it is now returning to 'normal' -- but, even then, the spike in new car sales is going to have an effect for the next few years as those additional cars work their way through the system.  I'd accept there might be a problem when sales get to <2m.

[but not necessarily a problem -- IMO there'll be a bit of a move to mass/public transport going forwards]

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Well .... my take is thats its nothing to do with brexit, a bit to do with diesel, a bit to do with PPI.

Since 2008ish when the first scrappage scheme was proposed, the UK car industry has been bringing forward future sales for ~10 years.

You eventually run out of future demand, so the present has to catch up. 

And thats where we are today - a spent-out UK car market who's buyer who's blown the deprecating for 2 to 3 PPI deals and is sat down wondering what the fuck he's got to show for ~20k spent over the last 10 years.

 

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I suggest it is because (as others have said in the other thread) the price of new cars has risen over the past couple of years, above inflation. IIRC up until very recently cars were much cheaper now than 20 years before when accounting for inflation.

Margins will have to be cut and dealers will perhaps close. I don't understand why these German marques have such sparse showrooms, they could be shrunk in half. They are like airport hangars...

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15 minutes ago, Democorruptcy said:

More people might try make their current car last a bit longer before they go for their first electric. They might think why splash out on something that looks old technology?

I think a significant aspect is not trusting politicians (again). We were told that diesel was the way to go.  A lot of people bought.  Now they are banning them from city centres as they are the spawn of the devil. 

If you car works and you have no reason to change it, why chance the government suddenly brining in legislation that means your new shiny car is practically worthless. 

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41 minutes ago, One percent said:

I think a significant aspect is not trusting politicians (again). We were told that diesel was the way to go.  A lot of people bought.  Now they are banning them from city centres as they are the spawn of the devil. 

If you car works and you have no reason to change it, why chance the government suddenly brining in legislation that means your new shiny car is practically worthless. 

They also put road tax up in April 2017.

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Oh yes, I forgot about the "new car premium" (tax), it's shocking. On my last car it was about £700 for the first year's tax. The manufacturers can discount to counter it I'm sure, but clearly aren't.

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