October new car demand in the UK was up 8.4% to 166,797 units, exceeding expectations as the consumer crunch bit and there was a run on a building society bank.
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Private buyer demand rose 5.6% last month and was up 1.3% for the year so far. Year-to-date registrations rose 2.5% to 2,107,312 units.
“After a strong September, one of the key months for car buying, we are pleased, if a little surprised, that the growth has continued into October,” said Christopher Macgowan, the outgoing SMMT chief executive who leaves in December.
“After interest rate rises, and the ongoing concerns within the banking sector, we expected private demand to weaken. However, October figures show private buyers are storming back to the showrooms, and SMMT has revised upwards the forecast for 2007 new car registrations.
“Interestingly, private buyers appear to be choosing smaller, more fuel-efficient cars with the Vauxhall Corsa topping the list in October, and the Ford Fiesta, over 2007 so far.”
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By GlobalDataThe SMMT said October 2007 volume was on par with the 1999-2006 average for the month of 166,429 units, but almost 10% above expectations for 2007. A slowdown had been expected, in light of economic concerns.
“Confidence appears robust with consumers keen to take advantage of new car deals, despite fears in the banking sector over credit levels and the price of fuel, the SMMT said.
“However, concerns remain that the market will cool in the future, as the rate of economic growth eases and if the banking crisis gathers pace,” it cautioned.
On 9 October the chancellor [UK finance minister] raised the GDP growth forecast for the UK this year to 3% but lowered the outlook for 2008, suggesting that growth of 2-2.5% was likely. Independent forecasters expect growth to be at the lower end of this range.
“This slowdown is expected to be focused in consumer spending and with it lower new car demand. At the same time costs are rising, with particular concerns over the recent increases in oil prices – which are approaching $US100 per barrel. This could curtail room to cut base rates at a time when the economy needs a stimulus, the car manufacturers group said.
The SMMT’s views were largely echoed by a dealers’ group.
“The continuing availability of great in-showroom deals, and consumers wanting to downsize to smaller cars have helped new car sales beat current economic trends to an unexpected degree,” said Sue Robinson, director of the RMI National Franchised Dealers Association (NFDA), part of the Retail Motor Industry Federation (RMIF).
“The overall retail market is suffering, but car sales are actually improving. This is the result of the great deals on offer, and consumers wanting to reduce motoring costs by moving to smaller vehicles, where much of the retail sales appears to have been generated.”
Despite the good news in the car sector, Robinson believes that consumer confidence would be buoyed by cutting interest rates.
“Reducing the interest rate may help overall consumer confidence to stabilise, and ensure financial planning.
“The Bank of England will announce its intentions on Thursday (8 November). I hope it makes the right choice.”
Diesel-powered cars took a 44.1% share of the October market, up from 41.7% a year ago. This was their best performance bar December 2005, when regulatory changes pulled forward demand.
“Consumers appear keen to improve fuel efficiency and lower their carbon footprint by switching to diesel models. Diesel penetration is forecast to pass 40% over the full year, for the first time,” the SMMT noted.
