New car sales in the UK in August plunged 18.6% over last year to 63,225 units, prompting the UK’s automotive trade association to urge government action to boost the UK’s fragile economy.
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Year to date volume was off 3.8% to 1,464,124.
“The market continues to weaken as consumers hold off new car purchases in the face of deepening concerns over the state of the economy,” the Society of Motor Manufacturers and Traders (SMMT) said.
“There is a clear need for sustained action by government to boost the economy and restore confidence,” said Paul Everitt, SMMT chief executive.
“Continuing economic pressure on households has made consumers wary of making big purchases, so by deciding against an interest rate reduction the Bank of England has missed an opportunity to kick-start the economy,” said Sue Robinson, director of the RMI National Franchised Dealers Association (NFDA) referring to Thursday’s announcement by the UK’s central bank.
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By GlobalDataToday, the Bank of England held interest rates steady at 5% in its monthly review, balancing concerns over the scale of Britain’s economic slowdown against a recent upsurge in price inflation.
August car sales were the lowest since 1966 and accounted for a quarter of the fall in volumes over the year-to-date, the SMMT said, adding that the last three months accounted for 89% of the drop.
With GDP growth projections revised down to 1.5% in 2008 and below 1% in 2009, coupled with rising inflation and the availability of cheap credit diminishing, SMMT has revised its forecasts for the new car market down to 2.26m and 2.16m for 2008 and 2009 respectively.
Volumes are expected to fall by about 10%, or over 85,000 units, in the final four months of 2008.
New ‘58’ plate sales this month are expected to slip below 390,000 units, from 419,290 units in a strong 2007.
The SMMT said the pace of decline in the private sector had quickened, reflecting consumers holding off from making new car purchases as they adjust to the unsettled economic setting.
“It is hoped attractive deals and offers can encourage September registrations,” the SMMT said.
Fleet volumes have also slowed, with declines in each of the past two months. Year-to-date volumes are flat, but the market share has grown.
Vauxhall’s Corsa (3,527) outsold the Ford Focus (2,933) in August, although places switched over year-to-date (73,429 Focus and 65,593 Corsa). Vauxhall outsold Ford in the month too, as last year, although Ford did close the gap. Lotus and smart both recorded exceptional growth in the month.
Mini segment volumes rose in August, as their market share doubled, while superminis’ share moved from 29.1% a year ago to 33.8%, suggesting consumers are switching to more efficient cars.
The diesel market fell for a second consecutive month in August (-12.7%, 28,029), although market share again improved – from 41.4% to 44.3%. As consumers tighten their belts and move to more efficient models, diesels remain an effective choice. VW’s Golf was the best selling diesel model both in August year to date.
Demand for alternatively fuelled vehicles fell back in August, down 25.7%, but remained up 5.7% over the year-to-date.
Growth in consumer spending eased to 2.3% in the second quarter on a year-on-year basis.
“The key concern is how much the growth will slow and when it will recover. Forecasts suggest the low point will be the start of 2009, before modest recovery,” the SMMT said.
The auto sector is hoping the government can quickly instil some confidence back into the economy. With oil prices falling, it is hoped inflationary pressures will ease and interest rates can be trimmed soon, although this alone is likely to be insufficient to restore confidence and boost spending.
