Auto industry sentiment remains challenged despite continued new car sales growth

David Borland, EY UK & Ireland Automotive Leader, comments on the Society of Motor Manufacturers and Traders (SMMT) new car registration figures for June 2024:

“New car registrations saw a remarkable 23rd successive month of growth in June, with a total of 179,263 sales, representing a 1.1% year-on-year increase. For the first time since 2019, one million sales have been achieved across the sector by the mid-year point.

“The UK auto industry is now just one month away from achieving two years of consistent growth in new car registrations - a demonstration of the industry’s resilience despite persistent headwinds including cost-of-living challenges, evolving regulations, changing technology and geopolitical uncertainty. 

“However, overall sales growth isn’t the only recurring theme for the industry. Fleet sales were once again the main driver of new car registration growth last month, with a 14.2% year-on-year rise, while demand from private retail consumers saw a ninth consecutive fall. Therefore, while the auto industry’s persistent resilience and achievements should be recognised, the complex challenges it continues to face, particularly in relation to the retail market, should not be downplayed.

“Despite Battery Electric Vehicle (BEV) growth in June of 7.4% year-on-year, year-to-date market share is still less than 17%, which is some distance from the 22% required as part of the Zero Emissions Vehicle (ZEV) Mandate. Petrol and diesel sales also declined last month – a trend expected to continue in the coming months amid reports of OEMs reducing Internal Combustion Engine (ICE) vehicle sales in pursuit of ZEV Mandate compliance. 

“Careful consideration needs to be given to the future of regulations such as the ZEV Mandate and how manufacturers and other organisations in the automotive ecosystem can be supported to navigate them. This impacts all parts of the value chain, including suppliers, retailers and fleet operators, and it requires upstream and downstream partners to adapt their portfolio in a dynamic market.”

“Should total vehicle sales continue on the same trajectory for the rest of the year and reach a further one million, OEMs would need to sell a total of 440,000 vehicles to be compliant with the ZEV Mandate. With only 167,000 ZEVs sold in the first half of 2024, there’s a significant challenge ahead.”