2024 a year of two halves for UK automotive as new car sales fall again – EY comments

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

“Despite consistent growth throughout the first half of 2024, UK new car registrations fell for the third time this year in November, with a 1.9% year-on-year decline. This is largely due to ongoing challenges related to retail demand, as well as some manufacturers reportedly limiting petrol and diesel sales in pursuit of Zero Emissions Vehicle (ZEV) Mandate compliance. For the full year-to-date, new car registrations have seen minor overall growth of 2.8%.

“For a second consecutive month, Battery Electric Vehicles (BEVs) were once again the only powertrain to record year-on-year sales growth in November, with a significant increase of 58.4%, while diesel and petrol saw falls of and 10.1% and 17.7% respectively. However, for this year-to-date, market share for BEVs is still only 18.7%, which continues to trail the 22% ZEV Mandate target. 

“The challenges facing auto manufacturers due to the ZEV Mandate have been heavily publicised in recent weeks, with the Government now considering making changes to the legislation and adding further flexibility. However, it has been reported that the UK’s ban on the sale of new petrol and diesel vehicles will still likely come into effect in 2030. Any alterations to regulations should consider the disconnect between yearly targets and current consumer demand, given private retail sales figures have been down consistently throughout 2024. Incentivising consumers to make the switch and improving sentiment around Electric Vehicle (EV) infrastructure will also be a critical challenge if the UK’s transition towards cleaner and greener transport is to accelerate in line with government ambitions.

“A current lack of EV purchase incentives and supply of finance, as well as changes in taxation that will likely impact consumers, are also among the several marked challenges the UK’s automotive industry is facing. Meanwhile, global challenges include restructuring and resizing needs, the slowing EV transition and the competitive rise of Chinese manufacturers.”

Further challenges ahead for BEV uptake

Edwin Kemp, Director, EY-Parthenon Strategy, said:

“In contrast to the trend seen throughout 2024, fleet sales were down by 1.1% year-on-year in November. However, private retail sales continued their downward trajectory, with a 3.3% decline. Business sales on the other hand saw a 5.2% rise, albeit this only represented an increase of 153 units.

“Despite November’s figures, fleet sales have done all of the heavy lifting this year-to-date, with growth of 12.9%, in contrast to a -9.1% decline in retail sales and -4.2% in business sales. This trend could cause problems in the young used car market, given fleet cars are often skewed more towards premium models in comparison to retail demand. The issue is amplified in the BEV segment with young used BEV demand undershooting supply. This has been a major contributor to downward movement in BEV residual values over the last 12 months, although last month’s performance improved.

“Persistent BEV market challenges have prompted several major auto manufacturers to pare back their BEV production and sales targets recently, which reinforces the magnitude of the challenge facing the UK in its pursuit of a fast and effective EV transition. The tone of several manufacturers towards the agency model also appears to be changing, which could have a temporary disruptive effect on the routes to market for all powertrains, but particularly for BEVs given ambitious sales share targets in place.”