May marked the 22nd consecutive month of growth in new car registrations in the UK, with a total of 147,678 sales, resulting in a 1.7% year-on-year increase. The UK’s automotive sector is inching closer to two years of steady growth despite significant macroeconomic challenges. These include prolonged economic stagnation, cost-of-living issues, evolving sustainability regulations, and the potential impacts of the upcoming general election.
Despite this positive trend, certain sector-specific issues remain persistent. Fleet sales once again drove the majority of new registration growth in May, showing a 14% year-on-year increase. In contrast, private retail sales continued to decline, dropping by nearly 13%. This underscores the difficulties the auto industry faces in attracting private consumers, particularly with the transition to Battery Electric Vehicles (BEVs), where private demand decreased by 2%.
In May, overall BEV sales rose by 6.2% year-on-year, signalling progress for Original Equipment Manufacturers (OEMs). However, the market share for BEVs this year stands at 16.1%, still trailing behind the 22% target set by the Zero Emissions Vehicle (ZEV) Mandate. Challenges affecting the BEV sector include public charging infrastructure, total cost of ownership, and insufficient incentives to encourage the transition.
Plug-in Hybrid Electric Vehicles (PHEVs) showed significant potential as a transitional technology, with sales increasing by 31.5% compared to May of the previous year. As the industry navigates these challenges, there are reports that OEMs might slow their overall sales to enhance compliance with the ZEV Mandate and avoid hefty penalties. Although this strategy might mitigate short-term risks, it is not likely sustainable in the long run.
It is crucial for OEMs, retailers, and policymakers to collaborate to strike a balance between advancing the transition to cleaner and greener transportation and mitigating negative impacts on the broader industry, including manufacturers and sellers in the UK.
As the summer months approach, the industry anticipates the usual decline in sales leading up to September, potentially further affected by the holiday season, the Euros, and the Olympics. The upcoming months will be critical for OEMs as they work to meet both internal and external full-year targets without compromising profitability and long-term strategy.
Surface Transforms plc (LON:SCE) is a manufacturer of next-generation carbon-ceramic brake discs for automotive and aircraft applications and has been certified to IS9001-2000 since 2008 and was certified to TS16949 automotive quality accreditation and AS9100C aerospace quality accreditation in 2015.
