UK new-car market enjoys bright summer, but clouds are gathering

05 September 2023

The UK’s new-car market enjoyed a bright August, growing 24.4% year on year. The country recorded 85,657 registrations in what is typically a quiet summer month. Purchasers usually wait until September when number plates change, but electric vehicles (EVs) are helping stimulate growth.

However, the Society of Motor Manufacturers and Traders (SMMT), pointed towards gathering storm clouds as a regulatory step-change draws near. The body warned that the expected zero-emission vehicle mandate is less than four months away, but the industry has yet to be handed anything tangible.

Large fleets were mostly responsible for last month’s positive figures. The sector recorded 51,951 new units, up 58.4% compared with August 2022. Meanwhile, business registrations increased 39.4% with 1,635 units. Backed by these results, the SMMT pointed out that the UK’s new-car market is now entering a second year of growth.

However, the industry body also highlighted some less positive outcomes in the month. Firstly, private demand fell by 8.1% year on year in August, even though 2022 was beset by supply constraints. Secondly, despite its improved results, the UK’s new-car market is still down 7.5% on pre-COVID-19 levels.

Two in five

The SMMT emphasised the success of electrified vehicles in August. Battery-electric vehicles (BEVs), plug-in hybrids (PHEVs) and hybrid-electric vehicles (HEVs) made up 37.8% of registrations collectively. This means electrified vehicles accounted for nearly two out of every five new cars taking to the road in the month.  

BEV uptake increased 72.3% year on year with 17,243 units, claiming 20.1% of the new-car market and setting the highest record since December 2022. PHEVs were not far behind in terms of growth, up 70%, but with a smaller 7.7% proportion of registrations.

Meanwhile, HEVs made up 10% of the market with 8,551 new units, up 6.8% on August 2022. This means plug-in vehicles (BEVs and PHEVs) collectively accounted for 27.8% of registrations with 23,844 new units in August, up 71.7%.

While this electrified result appears promising, petrol is still far out in front as the UK’s leading powertrain. When including mild-hybrid models, the fuel type accounted for 55.7% of the market, with 47,688 registrations up 19.3%.

Diesel on the other hand continued its fall from grace. Even when accounting for mild hybrids, the fuel type managed just 5,574 registrations in August, down 20.2% year on year. This meant diesel made up 6.5% of new-car registrations in the month.

Gathering clouds

While August’s positivity appeared to hold promise, the SMMT warned also of a potential upcoming problem. The awaited zero-emission vehicle mandate is expected to require carmakers to sell an increasing percentage of EVs before the ban on the sale of new petrol and diesel models begins in 2030.

‘With the automotive industry beginning a second year of growth, recovery is underway with EVs energising the market. But with a new zero-emission vehicle mandate due to come into force in less than 120 days, manufacturers still await the details,’ said Mike Hawes, SMMT chief executive.

‘Businesses cannot plan on the basis of consultations, they need certainty. Now, more than ever, government must match action to ambition, ensuring there are the incentives and infrastructure in place to convince drivers to make the switch,’ he added.

However, this is not the only step-change in the UK. Sue Robinson, chief Executive of the National Franchised Dealers Association (NFDA), highlighted how the ultra-low emission zone (ULEZ) has been encouraging interest in electrification.

‘The top of the news agenda for the past month has been ULEZ. NFDA’s members have begun to see the impact of the legislation with increasing enquiries and growing interest about switching to electric from a non-ULEZ compliant car,’ she said.

‘Feedback from members is that footfall is steady, particularly in these zones, with prospective EV consumers keen to speak to their local retailers, who act as vital information hubs for their communities,’ Robinson added.

Meanwhile, Rules of Origin under the Trade Cooperation Agreement promise to complicate matters within the industry. Carmakers will have to ensure 55% of a vehicle’s value is made up of locally sourced components. This applies specifically to the UK and the EU, meaning EU parts in a UK-built car would not count. But should a car’s value fall short of 55% total, then an import tariff of 10% will be applied.