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“Decline in buyer confidence,” collapsing sales of diesels & plug-in hybrids. But EV sales soar.

By Nick Corbishley, for WOLF STREET:

Sales of new passenger vehicles, as measured by registrations, fell 4.9% in June from a year earlier in the UK, according to the Society of Motor Manufacturers and Traders (SMMT). The UK is the second largest auto market in the EU, behind Germany. Total sales in the first half of 2019 dropped 3.4% year-over-year, driven by the ongoing collapse in diesel sales. But sales of gasoline vehicles rose 3.5% in the first half, and sales of battery electric vehicles (BEV) soared 60%.

It is the third year in a row of declining first-half sales for the UK’s automotive sector. Since the peak in the first half of 2016, registrations have dropped 10.6%, falling below 2014 levels. These registrations include leases (dealer sells to leasing company, which leases it to the customer):

The growth in sales of gasoline-powered vehicles has picked up some of the slack from the diesel death spiral, but it’s not nearly enough. Since 2016, the first-half sales of gasoline vehicles have grown by 146,473, while sales of diesel powered passenger vehicles have fallen by 335,000 units, leaving a deficit of around 190,000 vehicles.

The diesel death spiral, not only in the UK but in Europe more generally, is a consequence of endless disclosures since 2015 of industry-wide diesel emissions fraud. In June, diesel sales fell for the 27th consecutive month in the UK. In the first half of 2019, diesel sales plunged 19.4% year-over-year, after having already plunged 30% in the first half of 2018  During the three years since hitting the peak of 680,668 units in the first half of 2016, diesel sales have collapsed by 50%, to just 344,877 units:

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Sales of gasoline vehicles hit a new record of 840,436 in the first half of 2016. This was up 21% from 2016, but not nearly enough to compensate for the 50% collapse of diesel vehicle sales:

From January through June, sales fell for all three customer types: private customers (-4.8%), fleets (-2.5%), and businesses (-37.1%). There were also declines across every vehicle segment, except Dual Purpose which grew 7.3% year-to-date to take 22.6% of the market.

The so-called “supermini” (a small robust car) remains Britain’s favorite vehicle type, accounting for 31% of all registrations in the first six months. Below are the best sellers in the UK for the first half of 2019 (table via SMMT). Note that eight of the 10 best sellers were either small cars or superminis, the exceptions being two compact SUVs, the Nissan Qashqai and the Ford Kuga:

In the alternatively fueled vehicle (AFV) sector, the fates diverge:

  • Demand for battery electric vehicles is robust: BEV sales soared 61.7% in June and 60% in the first half, but the numbers are still small: about 12,000 BEVs were sold in the first half, for a market share of under 1%.
  • Things are not looking quite so rosy for plug-in hybrids, sales of which collapsed by 50% year-on-year in June and 30% in the first half, to 14,923 units.
  • But sales of hybrids, while they fell 4.7% in the month of June, have soared 17% in the first half to 49,217.

“A grave concern,” is what SMMT CEO Mike Hawes called the decline in plug-in hybrids. “Manufacturers have invested billions to bring these vehicles to market but their efforts are now being undermined by confusing policies and the premature removal of purchase incentives.”

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The decline in overall new vehicle sales — which the SMMT blames on “ongoing confusion over low emission zones and diesel, the removal of key ultra low emission vehicle incentives and an overall decline in buyer confidence” — is of major concern to global automakers. The UK is the second largest auto market in the EU, behind Germany. It is also the largest single export market for German automakers, which sold 800,000 new cars there in 2016 alone, or 20% of their overall global exports.

Reasons abound for the UK car industry’s multiyear decline, including broad consumer distrust of diesels in Europe and stagnating consumer and business demand in the UK, due in part to the pervading uncertainty surrounding Brexit. But as tempting as it may be, especially for some, to pin much of the blame for the industry’s malaise on Brexit, it’s worth bearing in mind that auto sales have been falling across the EU and other markets, including the two largest, China and the US, and they’re not facing Brexit.

Last year global car sales declined slightly for the first time since 2009, largely driven by a steep decline in China. They’re expected to fall more sharply this year. As car manufacturers reel from an array of disruptive forces — including tectonic technological shifts, trade wars, the end of Europe’s love affair with the diesel engine, and the waning appetite for new vehicles among cash-strapped, debt-laden consumers — one thing is becoming clear: Now is not an easy time to be in the car industry, wherever you are. By Nick Corbishley, for WOLF STREET.

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