Business is booming.

Car sales stay in reverse for a fifth consecutive month

Car sales fell for the fifth straight month in July, with new engine registrations falling 9 percent, official figures show.

About 112,162 passenger cars hit UK roads last month as manufacturers struggled to meet order volumes due to a lack of semiconductor chips needed to power technology in new vehicles.

The Society of Motor Manufacturers and Traders said the year-over-year drop in sales was the smallest on record in 2022, although industry insiders said worse will come due to the escalating cost of living.

Car sales still reversed: Some 112,162 cars – 9% less than in July 2021 – were registered in July as makers struggled to fulfill orders due to a lack of semiconductor chips

The car trade also blamed Covid lockdowns at key manufacturing and logistics centers in China and disruption to parts supply related to the war in Ukraine as additional factors limiting production output and the supply of new cars in the UK.

The drop in sales in July adds to an already poor half-year for car registrations, which the SMMT said “proved greater than expected, due to the ongoing severity and impact of the semiconductor shortage and global conflict.”

Mike Hawes, Chief Executive of SMMT, said: “The automotive sector has had another tough month, drawing on its fundamental resilience during a third consecutive challenging year as supply-side pressures come under pressure.

“Although order books are strong, we need a healthy market to ensure that the sector achieves the government’s ambitions for CO2 reduction.

‘The next Prime Minister must create the conditions for economic growth, restore consumer confidence and support the transition to zero-emission mobility.’

The SMMT said the year-over-year sales decline was the smallest on record in 2022, though industry insiders said worse will come due to the escalating cost of living.

The SMMT said the year-over-year sales decline was the smallest on record in 2022, though industry insiders said worse will come due to the escalating cost of living.

While Mr Hawes expects supply problems to ease in the second half of 2022, the industry association says it is unlikely the market will be able to recoup the significant losses incurred so far.

This seems increasingly unlikely as Britain is already embroiled in a cost of living crisis that will worsen in the coming months with rising inflation and projected energy prices to go through the roof.

“Manufacturing challenges, the cost of living crisis and rising utility bills are holding back consumer spending. Many are either turning to alternative options, such as the second-hand market, and many are putting off buying a car altogether,” explains Lisa Watson. . , director of sales at Close Brothers Motor Finance.

“The effect on sales continues to be felt across Europe, with the European Automobile Manufacturers’ Association announcing that passenger car sales in EU countries fell in June to the lowest number since June 1996.”

Analysts say rising energy prices will not only reduce consumer spending for the rest of the year, but also allow automakers to increase the price of their models

Analysts say rising energy prices will not only reduce consumer spending for the rest of the year, but also allow automakers to increase the price of their models

However, analysts say demand for new cars is still very high, with thousands of drivers putting their names on the order books and waiting for their vehicles to arrive.

Richard Peberdy, UK Head of Automotive, KPMG, said: ‘Despite the cost of living, demand for new cars in the UK continues to exceed supply, with long waiting times for many models.

But rising energy costs will further test consumers’ ability to buy new cars in the remaining months of the year, including the adoption of electric vehicles. Production costs are also likely to rise further, along with prices.’

With semiconductor shortages limiting supplies, What Car?  says customers will cancel orders if a dealer can't guarantee their new model will arrive within a year or place an order

With semiconductor shortages limiting supplies, What Car? says customers will cancel orders if a dealer can’t guarantee their new model will arrive within a year or place an order

Jim Holder, editor-in-chief of What Car?, said that while drivers like to wait a few weeks or even months for a new car to be delivered, the majority are likely to cancel their orders if they have a delivery time of more than a year.

“While the majority of automakers are still making strong profits against this backdrop, global semiconductor shortages and rising production costs are causing customers to suffer, both in terms of wait times and rapidly rising costs. It is not clear how long their patience will last,” Mr Holder said.

Our own research indicates that consumers are willing to wait, but not too much, with less than 5 percent of new car buyers saying they would like to wait more than 12 months for a new car, which is the stated delivery time. for many new models at the moment.

“If wait times can’t be met, buyers tell us they will either switch to the used or near-new market or look to different manufacturers in hopes of finding a car with a shorter wait.”

He adds: ‘The coming months will be crucial for the automotive sector as the full extent of supply shortages and rising costs are highlighted.

“Buyers are impatient and manufacturers are severely limited in how they can respond; this stalemate threatens to undermine the health of the UK car industry at a time when it is expected to invest heavily in electrification and carbon neutral manufacturing.”

Taking into account the difficult first seven months of 2022, the SMMT – not for the first time this year – its estimate for annual car sales has been revised downwards.

As the sector “enters its most challenging year in three decades,” the trade association has now cut its outlook to 1.6 million registrations, which would be 2.8 percent less than in 2021 – a year impacted by national lockdowns, which prevented customers from visiting car dealerships.

The Sunderland-built Nissan Qashqai was the top-selling new car in July.  Data shows that just over 2,500 examples were registered last month

The Sunderland-built Nissan Qashqai was the top-selling new car in July. Data shows that just over 2,500 examples were registered last month

The Oxford-made Mini hatchback was the second most popular new car in July with 2,410 sales

The Oxford-made Mini hatchback was the second most popular new car in July with 2,410 sales

The Vauxhall Corsa still leads the way as Britain's most popular new car to date in 2022

The Vauxhall Corsa still leads the way as Britain’s most popular new car to date in 2022

Despite the dismal results and the future outlook for the market, there were some small positives to be learned from July’s figures.

The best-selling models in the month were UK-produced cars – the Sunderland-built Nissan Qashqai SUV (2,514 registrations) and the Oxford-made Mini hatchback (2,410).

They have risen to third and fourth place respectively in the 2022 sales charts, behind the Opel Corsa as first and head of Ford’s Puma.

July also saw the continuation of soaring electric car sales with 12,243 zero-emission vehicles hitting the road last month.

That’s more than one in ten (10.9 percent) new models sold in July, though the 10 percent increase is the weakest monthly increase for electric cars since the pandemic.

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