British market records first new car growth in twelve months

08 May 2018

8 May 2018

The UK’s new car market recorded its first rise in 12 months during April as the country finally shook off its vehicle excise duty (VED) hangover.

The market grew by 10.4% in April, with 167,911 new units registered, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT). Demand was affected by a number of factors, including the timing of Easter, which resulted in two extra selling days during the month compared to last year, while the adverse weather during March pushed some deliveries into April as well.

However, the biggest factor in the growth during the month is the poor performance of the same month last year. This was caused when the UK government changed VED rates, meaning all except zero-emission vehicles were required to pay a flat rate of £140 (€159) per year, plus a first year registration fee depending on emissions. With some cars, including small diesels, originally only requiring a £30 annual payment, buyers brought forward their purchases, meaning March 2017 was a record month, and April saw a large decrease.

Diesel decline

While the growth in the market is welcomed, the diesel sector continued its rapid decline, and ended up 24.9% down compared to the same month last year. This may have been affected by new VED rules introduced from 1 April specifically for diesels, which places them in a higher VED band for their first year of registration.

The drop in diesel was made up by petrol, with demand up 38.5%, while registrations of plug-in and hybrid electric cars continued to rise, up 49.3%, thanks to manufacturer investment in a growing choice of models. Although the growth is welcome, these alternatively fuelled vehicles still account for just 5.6% of the market.

Private demand grew 26.3%, while the fleet market remained stable at 0.9%. However, business registrations saw a significant decline, falling 12.9% compared with the same month last year. Demand for supermini and dual-purpose cars saw the most significant growth of all segments, up 27.0% and 26.8% respectively.

Despite this significant rise in the month, the overall new car market remains down year-to-date, following a poor first three months. Registrations are currently 8.8% down with 886,400 units sold. Last year’s figures in the first three months were also affected by the VED increase, as buyers rushed to get their purchases completed before April. While this level of decline is expected to slow over the course of 2018, political and economic uncertainty will continue to affect the market and further instability could cause additional disruption.

Mike Hawes, SMMT chief executive, comments: ′It’s important not to look at one month in isolation and, given the major disruption to last April’s market caused by sweeping VED changes, this increase is not unexpected. While the continuing growth in demand for plug-in and hybrid cars is positive news, the market share of these vehicles remains low and will do little to offset damaging declines elsewhere. Consumers need certainty about future policies towards different fuel types, including diesel, and a compelling package of incentives to deliver long-term confidence in the newest technologies.’