Market Report: September 2018 new car registrations

September saw new car registrations decline 21% because of supply shortages caused by WLTP

The UK new car market fell by -20.5% to 338,834 vehicles in September as some carmakers struggled to come to terms with the new WLTP legislation that came into effect on 1 September.

Registrations of diesel cars plummeted -42.5% for the month and petrol fell 6.7% while hybrids and plug-in electrics fared better, up  3.9%.

The impact was felt across the board, with registrations by private consumers, fleets and businesses all declining, by -20.1%, -22.4% and -6.3% respectively.

Declines were seen across almost every vehicle segment, with MPVs and specialist sports cars showing the biggest falls, down -54.8 and -50.9%. Luxury saloons were the only segment to register growth, up +3.5%, while dual purpose cars, which have enjoyed strong growth over the year to date,

held steadier than most, falling just -3.5% in the month.

Year-to-date performance is currently -7.5% behind 2017, reflecting these factors and a drop in business and consumer confidence. Over the coming months, however, some rebalancing is expected as an increasing range of new models are certified for sale and backlogs ease.

European model line-up, it’s no surprise that we’ve seen bottlenecks and a squeeze on supply.

“These are exceptional circumstances with similar declines seen in other major European markets. The good news is that, as backlogs ease, consumers and businesses can look forward to a raft of exciting high-tech cars and a market keen to recover lost momentum.”

Looking at individual carmaker performances there were winners and losers for the month in terms of sales. The top 10 carmakers in the red for the month included Infiniti (-89.7%), DS (-77.5%) Bentley (-73.9%), Porsche (-67.9%) and McLaren (-60.8%). Other brands to experience a difficult month included Suzuki (-58.6%), Volkswagen (-55.2%), Audi (-53.4%), Dacia (-44.6%) and Alfa Romeo (-43.6%)

Some of the smaller operators were strong in September, including Aston Martin, which saw registrations rise 88.9%, Lotus (+85%) and Subaru (+62.6%). For bigger brands Mitsubishi turned in a strong performance (+35.4%), MG (+19.9%), Jaguar (+19.5%), Volvo (+7.6%) and Kia (+3.8%).

The fall in new car sales in September will have a brutal impact on some dealers’ Q3 and full year profitability, according to Coachworks Consulting.

“The introduction of WLTP at the beginning of the 68 plate-change always had the potential to have a disruptive impact on registrations in the second biggest sales period of the year but the ability of manufacturers to manage the impact has been mixed,” said Coachworks Consulting’s managing director Karl Davis.

“The impact on retailer profitability in September will be brutal as each delayed delivery will be compounded by the loss of revenue from finance, GAP and aftersales; it’s not just about chassis profit.

“The seriousness of the situation is shown by one brand cutting its dealer sales targets for September and Q4 by around 50% because it knows it will not have sufficient stock for its network and that will also have a major impact on dealer profitability. Manufacturer sales targets go up, they rarely go down.

“The supply of new cars will improve over the coming months but the pressure is now on all dealers to close Q4 as strongly as possible, otherwise it’s not only the share price of the plcs that could be negatively affected by less than forecasted full year results, but even the very survival of the highly geared smaller players, where lender confidence plays a crucial role in maintaining cash-flow.”

Mike Jones, chairman of ASE said dealer profits would come under pressure for the full year as a result of the 20% decline in September.

“Hitting annual profitability targets is clearly going to be a challenge for retailers and brands. Whether this is achievable produces both supply and demand questions. We need a supply of desirable vehicles to enable us to undertake a December sales push and we also need the demand to still be there.

“Having the benefit in kind information will help however we also need those customers not to have either extended their current leases or moved into nearly-new second hand cars. My prediction is that, despite the forecasts of some brands, we will not fully catch up in 2018 and retailers will see overall annual profitability fall, to be followed by a catch-up in March 2019.”

However, Ian Plummer, Auto Trader director was pragmatic on the September outcome.

“September’s performance was a matter of basic economics; there simply weren’t enough cars on forecourts that met the new WLTP standards for retailers to sell. However, there were some brands that were better prepared than others. Whilst the Volkswagen group brands struggled, other German prestige marques, such as Mercedes and BMW, performed much better and seem to have better anticipated the production of WLTP compliant cars in advance of the new regulations. For volume brands, Mitsubishi also had a very strong month, and as a result is joining SEAT as one of this year’s fastest growing brands.”

Ian Gilmartin, head of retail and wholesale at Barclays Corporate Banking, said: “A collective ‘ouch’ will be heard though the industry as getting September right is vitally important for the new car market.  That said, September was a far from normal month for the sector with new testing requirements impacting supply and blurring the picture. Also, following hot on the heels of an unexpectedly robust set of August figures, today’s data has to be viewed in context as backlogs will inevitably ease and consumers will be presented with an even wider range of new-tech cars to grab their attention.

“With car manufacturers focused on ensuring they are in line with new regulations and given the reluctance of buyers to commit to big purchases, in part due to Brexit uncertainty, it does look likely that as year-end approaches we’ll be down on 2017 for full-year sales.”