A look back at Q2 2024
 

The UK’s new car market saw modest growth in Q2, with year-on-year sales up in April (+1%), May (+1.7%) and June (+1.1%). When combined with the much stronger sales figures reported in Q1 2024 (+10.4%), this resulted in over one million cars registered in the first half of the year – a 6% increase on the same period the year before. This is the first time the sector achieved sales of over a million new cars at this point in the year since 2019.

June’s sales figures mean that there have now been 23 consecutive months of growth in the sector. However, concerns over total volume sales and private demand persist. Sales are still well below their pre-pandemic levels, with sales in H1 still down -20.7% on H1 2019, despite hitting the million mark. Furthermore, all the growth within the sector is coming from fleet sales. Private sales continue to decline year on year as consumers deal with the ongoing impact of the cost of living crisis and high interest rates which make borrowing money for a large purchase more expensive. Indeed, private retail demand fell for the ninth consecutive month, down -15.3%. As a result, retail buyers accounted for fewer than four in ten new cars registered (37.7%) in June and H1 2024 (38%), down from 45% in June 2023 and 45.8% in H1 2023.

Petrol-powered vehicles remained the most popular choice for consumers, accounting for 55% of all new cars sold during H1 2024. In contrast, battery electric vehicles (BEVs) commanded a 17% 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 (31% and 15% respectively). Combined, they now hold a 22% share of the market, compared to 19% in H1 2023.

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. Despite an overall increase in volume sales from 152,968 in H1 2023 to 167,096 in H1 2024, BEVs’ share of the market has only increased by half a percentage point. To increase the market share of BEVs from the current 17% to the required 22% as set out in the zero emission vehicle (ZEV) mandate now in force, efforts to incentivise the switch to electric should be considered. Deloitte’s recent Global Automotive Consumer Study shows that affordability of new EVs is one of the top concerns for consumers – with 71% expecting to spend less than £30,000 for a new or used EV. There should be a wider and more affordable range of EV models coming to the UK market in the year ahead, including those offered by new brands that should help drive growth in the sector. However, at the moment it is large fleets that continue to drive BEV uptake, thanks to tax incentives, where no similar support is offered to private buyers.
 

Is charging infrastructure the key to growth?
 

To support the growth of electric vehicles, there needs to be a renewed focus on removing the main barriers preventing the average consumer from contemplating a switch. In addition to affordability issues, charging infrastructure also remains a top concern for consumers considering buying an EV as their next vehicle. For example, according to Deloitte’s most recent Global Automotive Consumer Study 46% of UK consumers cited the lack of public electric chargers as a concern. 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 BEV at home are much more likely to contemplate buying one 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 to consider buying a BEV than those who do not have access to a charging point (17%). 

EVs – a pressing issue for the new government
 

The results of the recent general election will likely have consequences for the UK automotive sector and the switch to electrification. In the run up to the election, the Labour Party pledged to reintroduce the 2030 ban on sales of new petrol and diesel cars. The industry will require clarity on this, so that it can plan investments accordingly.

In recent months plug-in hybrid electric vehicles have become a more popular alternative for consumers with registrations up by 31% in the six months to June compared with the same period a year ago. This resurgence has had an impact on suppliers that now need to support manufacturers with parts for both petrol and diesel cars, hybrids and electric vehicles, all simultaneously. Given that the sector is already operating under considerable budget pressures, this is causing undue strain on some businesses.

If the ban on ICE vehicles is moved forward, there will be increasing calls for the government to revisit the use of financial incentives, such as a reduction in VAT on electric vehicles, to support demand. In addition, the government will need to have a clear strategy for dealing with cheaper, potentially subsidised Chinese imports. Despite criticism from many major European manufacturers, the EU has introduced new charges on EV imports from China. The new tariffs on individual manufacturers range from 17.4% to 37.6%, on top of an existing 10% duty for all electric cars imported from China. This could raise the price of EVs across the EU, making them less affordable for European consumers. The new charges came into effect at the beginning of July but are unlikely to be imposed until later this year after the EU has completed an investigation into state support of Chinese manufacturers. At the same time, the US continues to impose a 100% tariff on Chinese EVs. It remains to be seen how closely the new Labour government will align with this or not in the UK.
 

Outlook for Q3 2024
 

Data from the Deloitte Consumer Tracker shows that the percentage of consumers planning to buy a new car in the next three months fell from 7.2% in Q1 2024 to 6.6% in Q2 2024. Despite this drop, planned purchases remain above their historical average. As a result, private demand for new cars could pick up again in the second half of the year. However, any improvement in retail new car sales is based on the underlying assumption that there will be an easing of monetary policy, a continued improvement in the economy and consumer sentiment, and some degree of easing in vehicle pricing. The latter has been slow to happen thus far, but we are gradually seeing an increase in discounting from manufacturers and dealers now that supply issues have normalised and they are no longer dealing with a backlog of demand.