SMMT upgrades new car outlook after ninth consecutive month of growth

The UK new car market grew by 11.6% in April and the Society of Motor Manufacturers and Traders (SMMT) has now revised its 2023 outlook to a predicted 1.83 million vehicles.

The new data from SMMT shows April’s performance added 132,990 new car registrations and was the best result since April 2021, but remains 17.4% down on 2019 volumes.

Large fleet registrations are continuing to drive the new car market forward, with 33.1% and 39% growth respectively in April and the year-to-date. The SMMT said this is a result of the fleet market naturalising following weaker volumes last year.

Meanwhile, the retail market dropped by 5.5% to 61,342 units in April and levelled out year-to-date with a smaller drop of 0.9% to 289,595 units.

Battery electric vehicles (BEVs) remained the second most popular fuel type, with deliveries up by more than half to 20,522 and 15.4% of the market.

Plug-in hybrid vehicles (PHEVs) also posted strong growth, up 33.3% with 8,595 registered in the month, while hybrid electric vehicles (HEVs) recorded a 7.7% increase to 15,026 units.

As a result, electrified vehicles accounted for more than one in three registrations in April.

Petrol-powered cars retained their best-selling status, comprising 58.1% of all registrations.

> New car registration data

Supply chain pressures begin to ease

As supply chain pressures have begun to ease, the overall market is now up 16.9% in the first four months – the best start to a year since the pandemic, with growth worth £3.2 billion.

This has led to an upward revision of the quarterly market outlook, the first positive revision since 2021, with 1.83 million new car registrations expected in 2023, up from 1.79m anticipated in January.

That puts expected market growth this year at 13.5%, which would be the best percentage gain since 1983.

The sector is, however, less optimistic about growth in demand for BEVs, downgrading their expected 2023 market share from 19.7% to 18.4%, with high energy costs and insufficient charging infrastructure anticipated to soften demand. 

The latest outlook for 2024, meanwhile, suggests that 22.6% of new car registrations will be BEVs, a downward revision from the 23.3% forecast in January.

With a zero emission vehicle mandate due to come into effect next year, the SMMT has urged greater and faster investment in infrastructure, and more incentives to encourage purchase are essential to drive consumer confidence and accelerate uptake.

Mike Hawes, SMMT chief executive, said: “The new car market is increasingly bullish, as easing supply chain pressures provide a much-needed boost. 

“However, the broader economic conditions and chargepoint anxiety are beginning to cast a cloud over the market’s eagerness to adopt zero emission mobility at the scale and pace needed.

“To ensure all drivers can benefit from electric vehicles, we need everyone – government, local authorities, energy companies and charging providers – to accelerate their investment in the transition and bolster consumer confidence in making the switch.”

Industry reaction

Chris Knight, UK automotive partner for KPMG, said that while vehicle production is still ramping up, he believes the UK is over the worst of the supply challenges and the long wait times of recent months are decreasing. 

He said: "Car sellers are keen to protect the high margins of a supply constrained market, but we are seeing increasing discounting across the sector, bringing down average prices and creating better deals for consumers. 

"This has a knock-on effect in normalising historically high used car values.  Used EVs in particular are becoming more affordable as more cars than ever are entering the second hand market, and new prices are also coming down.  This creates more options for those wanting to make the switch to electric.”

Ian Plummer, commercial director at Auto Trader, said the positive performance for new cars over the last nine months represents a healthier economic picture than feared a few months back.

He said: "This new car performance is good for the market and consumer demand is strong with over 77 million visits to the Auto Trader platform last month alone. 

“But the softening of the SMMT’s forecasts on EV sales offers some cause for concern and underlines our recent call for measures needed to support the EV market, such as cutting VAT on public chargers. Hopefully ChargeUK’s new plans to invest £6bn in charging infrastructure will also help the cause of the transition to electric vehicles.”

David Borland, EY UK & Ireland automotive leader, said the direction of travel on the rise of alternative fuel vehicles is clear, but short-term plug-in vehicle demand will continue to contend with insufficient charging infrastructure and changes in the total cost of ownership for battery electric vehicles driven by high energy costs.

"For infrastructure, there was recently a welcome announcement that 18 charging network providers are creating a trade association - a clear recognition that a more joined-up approach is necessary to serve the needs of a fast-paced transition.”

Lisa Watson, director of sales at Close Brothers Motor Finance, said: “So far, the consistent year-on-year increases in new car registration figures provides most welcome reassurance that the motor industry is gradually getting back to pre-pandemic levels; a judgement strengthened by the promising manufacturing statistics unveiled last week.

"Moreover, the motor market appears to be met with ongoing sufficient consumer demand despite the cost-of-living crisis and its financial pressures impacting the spending power of consumers."

Watson said that while new car registration figures have provided the reason to believe the market is on the up, it's crucial dealerships remain cautious.

She said: "While the jumps in April's numbers should be welcomed and viewed positively, it is also important to consider the impact of the new registration spike.

"Despite a relative lack of choice under £50k for consumers, electric vehicle (EV) numbers continue to accelerate as manufacturers look to meet the government’s 2024 target, which requires 22% of a manufacturer’s output to be electric."

Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), said EVs continue to grow market share, but echoed thoughts that the velocity of sales is being impeded by a lack of adequate charging infrastructure across the country.

She added: "Franchised dealers with their Electric Vehicle Approved (“EVA”) accreditation are working hard to help customers navigate the challenges of this growing market and address any queries, concerns they may have as we move to an electric future.”