A look back at Q3 2024
 

The UK’s new car market saw modest growth in Q3, with year-on-year sales up 1% across the three months to September.  In spite of an uptick in sales in July (+ 2.5% YoY) and September (+ 1% YoY) sales were 1.3% lower in August than in the same month the year before.  A slowdown in sales in August is common, given that it precedes the new plates becoming available in September. As a result, the decline in sales that month had a relatively small impact on quarterly sales given that it contributed to just17% of total sales across the three-month period.

The UK new car market rose by 1.0% to 275,239 units in the key ‘74’ plate change month of September, compared to 272,610 units in September 2023. The introduction of new plates means that September is traditionally the second most important month for the car industry after March, and the industry will take some comfort from the fact that September 2024 represents the best performance for September sales since 2020. However, there are some ongoing concerns in the industry about the state of the market. Sales are still significantly below their pre-pandemic levels (-19.8% in September 2024 compared to September 2019) and all the growth within the sector has come from fleet sales. 

Private sales continue to decline year on year as consumers respond to the legacy of the cost of living crisis. Although private retail demand remained flat in August (+0.2% YoY) there was a sharp decline in July (-11.1% YoY) and a moderate decline in September (-1.8%), resulting in a fall in sales to private customers in the quarter as a whole. 

Petrol-powered vehicles remained the most popular choice for consumers, accounting for 51% of all new cars sold during Q3 2024. Battery electric vehicles (BEVs) commanded a 20% share of the market, making them the second-most preferred type of vehicle. 

However, in a sign that consumers are looking for alternatives before making the full switch to electric, both plug-in hybrid electric vehicles (PHEVs) and hybrid electric vehicles (HEVs) saw substantial growth in the first half of this year (18% and 15% respectively). In the key new-plate month of September, the uptake for PHEVs was higher than any other fuel type (+32.1%), taking a 9% share of the market. Combined, PHEV and HEVs held a 23% share of the market in Q3, compared to 20% in Q3 2023.

Concerns over the rate of EV adoption
 

Even though BEVs have become firmly established as the second most preferred type of vehicle among UK consumers, there is ongoing concern about the rate of adoption, with the SMMT forecasting that the  market share for BEVs would reach just 18.5% across 2024.The major barrier to consumer adoption appears to be affordability, and sales of BEVs in September 2024 were underpinned by heavy discounting by manufacturers and dealers.Across the year as a whole, large fleets have driven the uptake in BEV sales, thanks to tax incentives, whereas similar support is not offered to private buyers.

In response to the apparent slowdown in the growth trajectory of EVs, and no doubt mindful that the new Labour government has signalled its intention to reinstate the 2030 ban on polluting vehicles (reversing the previous Conservative government’s plans to push the ban out to 2035), the SMMT and 12 major vehicle manufacturers representing more than 75% of the market wrote to the Chancellor on 4 October, calling for a number of measure to encourage private consumers to make the transition to EVs. The measures proposed in the letter included temporarily halving VAT on new EV purchases, scrapping the vehicle excise duty ‘expensive car’ tax supplement due next year on zero emission vehicles, equalising VAT on public charging to match the 5% rate on home charging, and maintaining the tax incentives available to businesses.¹

When considering barriers to purchase, charging infrastructure also remains a top concern for consumers thinking about buying an EV as their next vehicle. According to Deloitte’s most recent Global Automotive Consumer Study, 46% of UK consumers cited the lack of public electric chargers as a concern. This means that the government and the sector must balance any focus on financial incentives with ongoing investments in charging infrastructure.

According to data from the Deloitte Consumer Tracker, the perceived lack of access to public charging means that consumers who have access to off-street parking to charge a car at home are much more likely to contemplate buying a BEV than those who do not. Our research also shows that overall, only one in four consumers (27%) would consider purchasing a new or used BEV as their next car. In contrast, among consumers who either already have access to a private charging point, or have access to off-street parking suitable for the installation of a charging point, 41% would consider purchasing a BEV as their next vehicle. This means that people who have the ability to charge at home are more than twice as likely than those who do not have access to a charging point (17%) to consider buying a BEV.

Outlook for Q4 2024

Data from the Deloitte Consumer Tracker shows that the percentage of consumers planning to buy a new car in the next three months rose from 6.6% in Q2 2024 to 7.2% in Q3 2024, significantly above the historical average. This, combined with growing consumer confidence, benign economic conditions and the prospect of further interest rate reductions, provides a relatively optimistic outlook for the sector, and the hope is that private demand for new cars will pick up again at the end of the year and into 2025. However, the strong showing in September 2024 was underpinned by an increase in discounting from manufacturers and dealers, and there is no guarantee that this will continue in the long term. 

Endnote:

1. UK-Auto-Open-letter-to-the-Chancellor-ZEV-incentives-call.pdf (smmt.co.uk)