A bumpy road to recovery

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While weather-wise it has been a scorching month for Britain, the new car market has been feeling the drought in registrations for far longer. The latest figures published this week show that new car registrations fell by -9.0% in July as global supply chain shortages continue to frustrate order fulfilment. This is the fifth consecutive month of decline, although it is the smallest such fall recorded this year.

Clearly, the first half of 2022 has been more challenging than expected. Semiconductor shortages continue, and their severity has been exacerbated by Covid lockdowns in key manufacturing and logistics centres in China, while the war in Ukraine has disrupted the global industry on top of its terrible humanitarian impact.

Stymied production inevitably means strained availability of new vehicles to meet demand. Order books remain strong, however, and supply issues are expected to start receding, but this issue is going to be with us into 2023 and likely 2024. Clearly it would require extraordinary growth in the rest of this year to recover the losses sustained so far, which is why the industry outlook has been revised downwards accordingly to 1.6 million new car registrations in 2022, as the sector faces its most challenging year for three decades. Cumulatively, it will mean that around two million registrations – roughly a year’s worth – will have been lost since the start of the pandemic.

However, there is light on the horizon. Next year, the expectation is for 1.89 million registrations – not a full recovery, admittedly, but a significant improvement on the past two years. The zero emission transition will also continue, albeit at a slightly slower pace. Plug-in market share is anticipated to reach 22.6% this year as manufacturers prioritise investment in zero emission vehicle production, while 2023 should see more than one in four new cars come with a plug.

Similarly, while the LCV market struggles to return to normal, with registrations down -24.1% year to date and an outlook anticipating an overall decline of -13.7% by the end of the year, battery electric vehicle (BEV) uptake looks much more positive. Around 6.4% of new vans registered are expected to run entirely on electric by the end of the year – still some way behind cars, but that would represent just under a doubling of BEV market share, even in a challenging year.

UK Automotive will need to continue drawing on its innate resilience and, while supply issues should start to reduce, we still face other significant challenges. The industry is going through the biggest transformation in its history in going zero emission, and we are all facing significant economic headwinds. The next Prime Minister must create the conditions for economic growth, restore consumer confidence and support the transition to zero emission mobility. Doing so will deliver jobs and investment, and help us achieve our shared decarbonisation goals.

The post A bumpy road to recovery appeared first on SMMT.

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