Car industry faces ‘perfect storm’ as sales drop

New car sales fell by 7% last year with the industry blaming “a perfect storm” for the decline.

Some 2,367,000 new cars were registered in 2018, down more than 173,000 on the previous year.

UK trade body the Society of Motor Manufacturers and Traders (SMMT) predicted a further 2% drop in demand this year.

SMMT chief executive Mike Hawes described 2018 as “highly turbulent”, but insisted sales were “on a par” with the average over the past 10 to 15 years.

He warned that a drop in consumer confidence linked to Brexit, concern about diesels and the impact of a new testing regime are all having a negative effect on the market.

“The challenges before us are something of a perfect storm,” Mr Hawes said.

“It’s causing considerable worry and agitation across boardrooms both in the UK and abroad.”

He said it would be “unfair” to attribute the entire drop in demand to fears over the UK’s withdrawal from the EU, but explained that falling consumer confidence has reduced people’s inclination to make a “big ticket purchase”.

A no-deal Brexit would be a “catastrophe for the industry”, according to Mr Hawes, who stated that Theresa May’s agreement with the EU is “not a perfect deal” but would provide the transition period the automotive sector needs.

The “lingering sense of uncertainty” around how diesel cars will be taxed and treated is also affecting the total number of cars being sold, Mr Hawes said.

Demand for diesels sank by 30% last year.

Some diesel car owners are switching to petrol (up 9%) or alternatively fuelled vehicles (up 21%) such as plug-in hybrids or pure electrics, but the majority are holding on to their existing cars, SMMT figures show.

The falling market share of diesel cars – which produce less CO2 than petrol models – is making it harder for manufacturers to meet EU targets on cutting CO2 by 2021.

The average amount emitted by new cars in the UK in 2018 rose by around 3% year-on-year.

Mr Hawes claimed the Government’s decision to slash grants for new low-emission cars in October “doesn’t really send the sign to the consumer that these are the right vehicles to be bought”.

The implementation of a new emissions testing procedure in the European Union, known as WLTP, came into force in September and has led to a supply shortage which also had an impact on sales.

Jim Holder, editorial director of What Car? magazine, told the Press Association the 7% decline in new car sales last year represents an “abrupt downturn”, but he believes the automotive industry remains “reasonably robust”.

He added that negativity towards diesel vehicles – which has been “bred by misinformation from government outwards” – has “potentially sunk” its future.