UK new-car market slowdown continues with marginal growth in June

08 July 2024

For the third consecutive month, new-car registrations in the UK improved by the smallest of margins. Autovista24 special content editor Phil Curry considers the latest figures and the plans laid out by the country’s new government.

The UK recorded a 23rd consecutive month of growth in June, but for the third time in a row, the increase was less than 2%.

A total of 179,263 new cars were registered in the month, a 1.1% improvement on June 2023. This is according to the latest data from the Society of Motor Manufacturers and Traders (SMMT). Growth was once again driven by electrified vehicles and by fleets, as private sales and internal-combustion engine (ICE) deliveries decreased.

However, following the UK general election, the country’s automotive market may be in for another period of instability. Much hinges on whether the new government returns the ban on the sale of new ICE vehicles to 2030. The potential of this has seen the SMMT call for battery-electric vehicle (BEV) incentives to help drive uptake.

‘The private consumer market continues to shrink against a difficult economic backdrop, but with the right policies in place, the next government can re-energise the market and deliver a faster, fairer zero-emission transition. All parties are agreed on the need to cut carbon and replacing older fossil fuel-based technologies with new electrified powertrains is the essential step to achieving that goal,’ commented Mike Hawes, SMMT chief executive.

Slowdown continues in UK

The 1.1% increase in June follows a 1% rise in April and a 1.7% improvement in May. While this suggests a continuing slowdown in registrations, the UK’s new-car sector is stable, recording growth every month this year. This is unlike other markets across Europe which have fluctuated between growth and decline. This includes France, Germany, Italy and Spain.

While the market has slowed, the UK reached the milestone of over one million registrations in June. This is the first time the country has hit this milestone halfway through a year since 2019. At this stage, the market was not yet impacted by the COVID-19 pandemic and supply-chain crisis.

Last month’s growth was set against the backdrop of a general election. This can sway buyers, especially businesses, to wait and see what an incoming government may offer economically. However, the lack of disruption could be down to the small amount of attention paid to purchase incentives during campaigning.

The fleet market drove registrations growth again, with uptake in June increasing by 14.2% year on year. The sector accounted for 59.1% of all deliveries, an increase of 6.8 percentage points (pp) compared to the same month last year. In the first six months of 2024, fleet registrations were up by 22.3%, for a 59.6% share of the market.

Private deliveries suffered their eighth successive decline since a 0.3% improvement in October 2023. June saw figures drop by 15.3%, with a 37.7% market share down 7.3pp year on year. In the first six months, the private sector was down 12%, with a 38% market share.

Business registrations outpaced both markets, with a 22% improvement in June. However, this was on a smaller volume, with 5,770 registrations leading to a 3.2% market share. In the year to date, business deliveries were down by 0.6%.

Electrified leads the way

June’s modest registration increase owes everything to the success of electrified vehicles, including full hybrids (HEVs), plug-in hybrids (PHEVs) and BEVs.

The SMMT separates mild-hybrids (MHEVs) into their respective petrol and diesel categories, meaning the HEV figure only consists of full hybrids. The powertrain saw 26,702 units delivered last month, an increase of 27.7% over June 2023. This equated to a 14.9% share of the country’s new-car market, up by 3.1pp.

In the year to date, HEV registrations increased 15.2%, with a 13.7% market share. The technology is proving popular among buyers, especially with more models available.

PHEVs also performed strongly in June. Although the powertrain’s volume was the smallest of all electrified vehicles, with 16,604 units in June, this was up 30%.

This meant the technology outperformed both HEVs and BEVs in the month, taking 9.3% of the market. Across the first six months of the year, PHEV deliveries were up 31.2%. An 8.1% market share ensured it was not the lowest-ranked powertrain in the UK anymore.

UK BEV slowdown?

Despite reports of a slowdown, the BEV market still saw strong growth. With 34,034 units, it was the highest volume electrified vehicle type in the UK, beating both HEVs and PHEVs. This equated to a 7.4% increase, lower than its stablemates.

The all-electric technology is no longer registering impressive double-digit increases. As the UK’s second-most-popular powertrain, it is now competing with strong results recorded in previous years.

However, the market is facing challenges, both from its own success and negative media reporting. A lack of infrastructure in the UK is due to vehicle uptake outperforming charge point planning. Meanwhile, early adopters are not yet ready to trade vehicles in, meaning fewer young used models.

BEVs are still proving popular, however, with a 19% market share in June comfortably ahead of both HEVs and PHEVs, which saw better growth. This is a 1.1pp improvement over last year. In the first half of 2024, BEV registrations have improved by 9.2%, with a 16.6% market share up by 0.5pp.

The all-electric market is now riding the rapids when it comes to growth. So, the SMMT has called for incentives to help the market and allow manufacturers to achieve zero-emission targets.

‘We need financial incentives for people to buy electric vehicles. This could be in the form of VAT cuts on purchasing, but also tax cuts on the price of public charging, to ensure that those who charge at home pay the same as those who cannot,’ Hawes stated at the recent SMMT International Automotive Summit.

ICE losing traction

The UK registrations slowdown has coincided with declines in petrol-powertrain deliveries, and June continued this trend. While the fuel type dominated the market in the month, with 91,227 deliveries, this was 7.8% down year on year. This is its biggest decline of the year, following a 3.1% fall in April, and a 2.1% drop in May.

As MHEV figures are included, this is even more of a concern. Last year, the mild-hybrid technology, which was counted separately, made up 40% of registrations. Folding these numbers into the overall petrol market is therefore not helping sustain the figures. Petrol still dominated the market in June, with a 50.9% share of all registrations. Yet this was 4.9pp lower than the same month last year.

Since the end of the first quarter, interest in petrol seems to have waned. At the end of March, petrol growth stood at 9.4%. Yet in the second quarter, this collapsed, and over the first half, petrol saw its registrations improve by only 2.7%. A total of 554,087 units represented 55% of the market, 1.8pp down in comparison to the first six months of 2023.

The diesel decline continued, with June seeing a 17.2% drop in deliveries, as 10,696 units were registered. This meant that the overall ICE market experienced an 8.8% drop in the month. Halfway through 2024, was just 0.9% up compared to the first six months of 2023.

The 2030 conundrum

Labour’s election victory has the potential to cause more uncertainty for the UK automotive industry. This comes at a time when businesses had hoped for regulatory stability.

The party stated in its manifesto that it would look to reintroduce the 2030 ban on sales of new petrol and diesel models in the country. This ban was delayed until 2035 by the previous government in September last year, following months of uncertainty. So, by 2035, only zero-emission vehicles (ZEVs) would be permitted for sale.

This preceded the introduction of the ZEV mandate, which set a path to zero-emission-only new vehicle sales in 2035. The mandate requires carmakers to sell increasing amounts of ZEVs in the years preceding the ICE and hybrid ban.

The new government has yet to announce its plans for the sector. However, bringing the petrol and diesel ban back to 2030 would provide an additional challenge.

‘When the last government moved the date from 2030 to 2035, the response from the automotive industry was mixed. However, we are a year down the road, and by the time a policy is announced, it will likely be five years before a new-ICE ban is implemented,’ Hawes said at the SMMT summit.

‘Over the last 12 months, all brands have adjusted their model cycles in relation to the new 2035 date, and that would need to change again on shorter notice, so that will increase uncertainty. However, everyone remains committed to a new ZEV-only policy from 2035.

‘What matters is having that certainty, having an appropriate shift possible in terms of time scale, but also having the conditions that enable you to have that strong, vibrant domestic market,’ Hawes concluded.

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