New car market shows small signs of growth

• New car registrations increased by 1.2 per cent in August to end five months of decline
• Industry growth was driven by uptake in electric and petrol vehicles
• Automotive sector's recovery is threatened by spiralling energy costs and inflation 

New car sales in the UK increased by 1.2 per cent last month (August 2022) as the market stabilised after five straight months of decline. 

Industry data from the Society of Motor Manufacturers and Traders (SMMT) show 68,858 new cars were registered during the traditionally quiet pre-plate change month of August, with growth being driven by sales of petrol and electric vehicles which were up by a respective 7.5 and 34.5 per cent. 

Total new car registrations in the UK remain 10.7 per cent down in 2021 and 35.3 per cent below the pre-pandemic average of 2019. The SMMT has warned that rising costs for car manufacturers and dealerships could derail the industry's recovery. 

"Spiralling energy costs and inflation on top of sustained supply chain challenges are piling even more pressure on the automotive industry’s post-pandemic recovery, and we urgently need the new Prime Minister to tackle these challenges and restore confidence and sustainable growth," said Mike Hawes, SMMT Chief Executive. 

Electric car demand remains strong

New car supply has been disrupted by a number of ongoing global supply chain issues, with a shortage of semiconductors and Covid lockdowns in parts of Asia resulting in long waiting times for new vehicles. The war in Ukraine has also affected the supply of raw materials, adding further strain on key manufacturing and logistics centres in Europe.

Growth in August was driven primarily by the sale of new electric cars. EVs now account for 14.5 per cent of all new car sales in the UK and some market commentators do not think the rise in the energy price cap will affect the sector's growth in the short term. 

Chris Evans, Head of Sales at heycar, said: "If energy price trends continue, we estimate that EV fuel costs will reach parity with petrol and diesel within six months. However, while some car buyers will be put off by the higher running costs, we think the UK’s EV market will continue to grow. 

"In part, this is due to EVs making up a small proportion of vehicles on dealer forecourts. There is already a significant shortage of EV stock compared to demand. Soaring energy costs are unlikely to derail this trend in the short term."

"It could be the calm before the storm"

Despite the positive figures for August, some have warned of trouble ahead. John Wilmot, CEO car leasing comparison website LeaseLoco said "it could be the calm before the storm".

“Households are having to make difficult decisions, cutting spending in the coming months as the cost of food and utility bills spirals. And that means families may delay purchasing big ticket items such as a new car, unless it's absolutely necessary," added Wilmot.

New van registrations were down 24.6 per cent in August, which means sales have declined every month of 2022, fuelling fears of low business confidence. The Bank of England has warned that the UK economy will fall into recession in the final four months of 2022.  

Ask HJ

Why are electric cars so expensive?

Why are electric cars so expensive? It looks like a cynical profiteering opportunity to me, what’s the honest story?

Electric cars are expensive because of a combination of factors. The technology is still very new and you're paying for the development of that. Batteries are expensive - so if you're looking for a large electric SUV with a big battery and long range, you'll have to pay for that. It's also a simple case of supply and demand - there are long waiting lists for new electric cars so manufacturers can ask high prices (and used electric cars will retain a lot of their original value). It doesn't help that the Government's dropped its plug-in car grant. It's worth factoring other cost savings when buying an EV, though - you won't pay any tax, while maintenance costs should be lower. There are some affordable electric cars on the market, too - you won't pay anywhere near £1000/month for any of MG's models, for example.

Answered by Andrew Brady

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Ask HJ

Should I buy a hydrogen car?

Please can you explain what using a hydrogen fuel cell car would actually be like? Is it readily available to fill up and how would it compare to a standard car with regards to cost?

In theory, a hydrogen car could be the ideal compromise between a petrol and an electric car. It's better for the environment and cheaper to run than a petrol (or diesel) car, while it's also similar to an electric car in the way it drives (with effortless acceleration, brake regeneration and impressive refinement). Hydrogen cars can also travel further between top-ups than battery-electric vehicles, while refuelling a hydrogen car takes a matter of minutes. The problem with hydrogen is it's expensive to produce and the infrastructure for refuelling hydrogen cars simply isn't there (there are currently around 14 hydrogen filling stations in the UK). There are very few hydrogen cars on the market and, as we're now so far down the path of pure-electric vehicles, I don't think we're going to see a seismic shift towards hydrogen power in the future.

Answered by Andrew Brady

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