Fleets drive UK registrations as market walks tightrope

07 June 2024

While new-car registrations increased in the UK last month, the market is seeing some struggles that could make its run of growth difficult to maintain. Autovista24 special content editor Phil Curry examines the data.

The UK’s new-car market recorded a 22^nd consecutive month of growth in May. However, registrations have slowed in recent months. Figures now suggest the country’s automotive sector may be maintaining a delicate balance between growth and decline.

In May, new-car registrations increased by 1.7% year on year, according to the latest data from the Society of Motor Manufacturers and Traders (SMMT). A total of 147,678 units were delivered to customers. In what was a mixed month for Europe’s big five automotive markets, the UK was one of only two countries to see growth in May.

Yet the UK’s market does contain a degree of volatility. This threatens the impressive run of growth, which stretches back to the end of the supply-chain crisis in mid-2022. The country is the only one of the big five to have not seen any new-car market declines since August 2022. But looking at the figures from May, this run is in danger of ending.

Fleets first once again

The UK’s registration growth in May was thanks to the fleet and, to a smaller extent, business sectors. The market has become heavily reliant on the larger fleet sector to keep numbers up. Fleets have led registration figures since October 2022. Before then, the private sector had been leading the market for over a year.

Last month, new-car deliveries to fleets increased by 14%, continuing the sector’s trend of driving growth. Of all registrations in the UK, those going to fleets accounted for 58.8%. This figure has grown from 52.5% in May last year, while other market shares have declined.

The last time fleets were outperformed was in January 2023, when business registrations experienced a greater increase, albeit on much lower volumes. Business registrations improved by 9.5%. Yet at 3,355 units, this sector only accounted for 2.3% of the overall market, up from 2.1% a year earlier.

Private registrations declined again in the UK, with deliveries dropping 12.9% in May. This continued a run of losses stretching back to November 2023. Last month, private deliveries made up 38.9% of the total market, down from 45.4% in May 2023.

In the year to date, while fleet registrations were up by 24.2%, private deliveries are down 11.3%. Should fleet companies begin reducing their passenger-car requirements, it is unlikely that the private sector will immediately pick up the slack to maintain growth.

The business market works with such small figures that it would be of little help. In the first five months of the year, this market was down 6.3%, with 17,709 registrations.

ICE in decline

Another sign of weakness in the UK last month was the performance of the internal-combustion engine (ICE) market. Both petrol and diesel suffered declines in May.

With the SMMT merging mild-hybrids (MHEVs) with their respective ICE counterparts, this is even more significant. It means there is a larger total of petrol registrations, due to more choice in the petrol market. Therefore, the decline represents a genuine lack of interest from buyers when it comes to petrol models.

This was also reflected in the market share. The 81,058 petrol units represented 54.9% of the total registrations in the month, down from 57% a year earlier. May also represented the second consecutive month of decline for petrol.

In the first five months of 2024, the powertrain increased its deliveries by 5%. However, year-on-year growth of 9.4% was recorded in the first quarter of 2024, confirming falling interest.

Diesel continued its decline in May, down by 16.7% with 9,220 units delivered. This led the powertrain to a 6.2% market share, dropping by 1.4 percentage points (pp) from May 2023. This means that ICE registrations were down by 3.8% year on year last month. Their market share fell from a combined 64.6% in the same month last year, to 61.1%.

Cooling of interest?

Two successive months of declines for petrol, combined with the continued fall in diesel registrations, suggests that interest in the technology is starting to cool.

Petrol is still the prevailing powertrain in the UK, with its monthly share as high as 57.3% in January. However, this makes the 54.9% share in May the lowest of the year. Its hold on the market has loosened across the first five months of 2024, as drivers and companies turn to more sustainable models.

It is uncertain whether petrol registrations will pick up significantly as the year progresses. But as more electrified vehicles are registered, the dominant market share will be eroded. This means it is only a matter of time before petrol loses its lead.

Instead, the market is being driven by electrified powertrains, including full hybrids (HEVs), battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs). This downturn for traditional combustion engines may go hand-in-hand with increasing fleet registrations.

Companies have a number of green targets to meet. As transport is one of the most impactful areas on emissions, there is a push to ensure fleets are made up of low and zero-emission vehicles. So, as fleet registrations increase, so too does the number of electrified models.

BEV bounce continues

BEVs continued to be the UK’s second most popular powertrain in May. All-electric registrations grew by 6.2% in the month, outperforming the overall market. There have been concerns about a slowdown in the UK’s BEV market in recent months. However, May saw the technology’s market share jump to 17.6% from 16.9% a year earlier.

Between January and May, BEVs made up 16.1% of registrations, close to the 16.5% achieved across the whole of 2023. This was also up from the 15.7% recorded at the same point last year.

The market has slowed from the regular double-digit registration increases seen in 2023. However, the 9.7% year-to-date figure represents 133,062 units, ahead of both HEV and PHEV powertrains.

BEV registrations entered a difficult phase this year. With early adopters having purchased a zero-emission vehicle, the job of convincing other drivers to take up the technology began.

The declines in the BEV market at the end of 2023 were also widely reported. However, it now appears that this was due to carmakers holding back deliveries into 2024. This means these models can count towards their zero-emission vehicle (ZEV) mandate target of 22% this year.

This does raise concerns that the overall BEV market share is some way below the 22% target. While each manufacturer will have a different unit target to reach its threshold, the overall market performance suggests there is some way to go to make the cut. Otherwise, carmakers will need to rely on various credits and other options in order to avoid large fines.

High hopes for hybrids

As the ICE market struggled in May, the hybrid market accelerated. HEVs recorded 19,503 registrations, up by 9.6% year on year. PHEVs performed even better, with growth of 31.5%, although this was based on a lower volume total of 11,866 in May.

For PHEVs, this meant a market share of 8%, helping its year-to-date figure to climb to 7.8% from a 6.4% share a year earlier. May’s performance helped to increase the gap between the powertrain and diesel. While the plug-in technology finished as the least-popular drive option in 2023, it now seems set to avoid this fate. Diesel may instead languish at the bottom of the pile.

Meanwhile, HEVs recorded a 13.2% market share in May, jumping 0.9pp year on year. This put its year-to-date share at 13.4%, up from 12.8% at the same point last year.