December sales decline not as bad as forecasted

New car registrations fell by 21.2 per cent in December to 108,691 units from December 2007's 137,960 units.

Full-year figures were down by 11.3 per cent to 2,131,795 units from 2,404,007 in 2007 - a difference of nearly 275,000 registrations.

The figures confirm an automotive industry deep in recession, but the figures were not as bad as the forecasted 35 per cent fall, according to the Society of Motor Manufacturers and Traders.

The VAT cut is a likely factor in the better-than-expected figures. Nevertheless, 2008 registrations were their lowest since 1996. SMMT is currently forecasting sales of 1.78m for 2009. Market peak in 2003 was 2.579m units.

The news comes as pressure grows on the government to make credit available to struggling Tata-owned Jaguar Land Rover, while Chancellor Alistair Darling may yet receive requests for loan guarantees from other car foreign manufacturers with bases in the UK.

Fuel types

Diesel penetration reached an all-time monthly high of 43.6 per cent as consumers move to minimise running costs. Diesel, petrol and alternative-fuel vehicles were down in December by 18 per cent, 24.5 per cent and 25.3 cent respectively compared to December 2007.

Diesel registrations were still down by four per cent on 2007, though petrol registrations took a 17.3 per cent his year-on-year.

Diesel market penetration is currently at three times the level of 2000.

Alternative-fuel vehicles, including hybrids, biofuel models, electric and LPG were down by 4.9 per cent in sales between 2007 and 2008.

Sectors

Private registrations fell by 23.7 per cent compared to December '07, while fleet and business registrations dropped by 18.5 per cent and 30.5 per cent respectively.

Over the course of the year private, fleet and business registrations fell by 14.7 per cent, 7.1 per cent and 20.7 per cent respectively.

Segments

Demand for small cars continued to fare better than for larger vehicles, with the mini segment recording the only growth in 2008 and superminis seeing their market share climb to 33.4 per cent, from 32.1 per cent in 2007.

The new Ford Fiesta was the best selling model in December, while the Ford Focus was the best seller for 2008.

CO2

Average new car CO2 fell by a record 4.2 per cent to an average of 158 g/km in 2008, a total reduction of 16.8 per cent since 1997.

Commercial

Registrations were down by 22 per cent in December and by 10.7 per cent to 346,873 in 2008. Vans were down by 26.6 per cent for December and down 14.3 per cent to 289,463 for the year.

There was some good news with trucks up 5.8 per cent in December, and up 13.1 per cent to 57,410 for the year.

Land Rover and Ssangyong were the only manufacturers to make any commercial vehicle gains in 2008. Ford is still the largest commercial retailer by far, with 80,735 sales and a 27 per cent share of the market.

Taxis

London Taxis International sales fell by 37.07 per cent in 2008, though the UK taxi manufacturer still has a virtual monopoly on the market at 94.81 per cent.

Regions

Figures also show the disparity between the extent of sales declines across the different parts of the UK. Against a 2008 UK average of 11.36 per cent, registrations in England were down 10.79 per cent; Nothern Ireland was down 17.49 per cent; Scotland by 15.01 per cent; and Wales closest to the national average on 11.37 per cent.

Manufacturers - winners and losers

Annual sales figures make for ugly reading for most manufacturers, with only Chevrolet, Dodge, Hummer, Jaguar, Kia, Smart and Volvo increasing sales in 2008.

Cadillac, Chrysler, Corvette, Jeep, Land Rover, Lexus, Porsche, Proton, Saab and Ssangyong sales all fell by 30 per cent or more, while volume manufacturer Renault sold over 35,000 less cars in the UK than in 2007 - a fall of 29.37 per cent.

December 07-December 08 figures make for even worse reading, with the majority of mainstream manufacturers registering a fall of between 20 per cent and up to 60 per cent.

Only Hyundai (1.91 per cent), Mazda (9.39 per cent), Smart (33.5 per cent) and Ssangyong (50 per cent) increase sales in December 2008, while Fiat registered exactly the same amount of cars (3,058).

The biggest Dec-Dec falls were Bentley (61.64 per cent), Cadillac (50 per cent), Chrysler (74.69 per cent), Hummer (88.89 per cent), Lexus (50.31 per cent), Mitsubishi (66.91 per cent), Perodua (50 per cent), Subaru (65.26 per cent) and Suzuki (52.60 per cent).

The revived MG marque, now producing MG TFs at Longbridge under SAIC, sold 133 models in 2008.

The list of top ten cars for registrations in 2008 is dominated by Vauxhall (Corsa, Astra, Vectra, Zafira) and Ford (Focus, Fiesta and Mondeo), with the Focus taking the top spot for the tenth successive year with just over 100,000 sales. Only five other manufacturers sold more than 100,000 across their entire model range in 2008 (Vauxhall, Peugeot , BMW, Toyota and Audi).

The Volkswagen Golf, BMW 3 Series and Peugeot 207 round off the top ten.

Reaction

“The global economic downturn, precipitated by the crisis in the international banking and finance sector, created unprecedented challenges for the UK automotive industry in 2008,” said SMMT chief executive, Paul Everitt.

“The measures taken by government to support the banking sector and kick-start demand have been necessary, but are not yet sufficient to restore confidence.

"Further action to ease access to finance and credit across the economy is essential if long-term damage to valuable industrial capability is to be avoided.

“2009 will be another difficult year for the UK automotive industry with new vehicle registrations and production significantly reduced. The industry faces these challenges stronger and more resilient than in recent memory.

"The extraordinary circumstances we currently face mean that government support will be required to take advantage of global economic growth when it returns.”

• “The year ended well for truck registrations, while vans continued down but not as fast as in November,” said Paul Everitt on the commercial market.

“After the abrupt end to buoyant registrations in 2008, we’re looking to the year ahead with caution rather than trepidation. Consumer and business demand will be low as we see the first big recession since the early 1990s.

Spending will stabilise in the second half of the year; with costs falling, credit markets recovering and government policies supporting recovery. Confidence to invest in new vehicles will return, but the revival may be slow, taking some years to repeat recent record volumes.”

• "The full-year new car sales figures for 2008 clearly show that demand was strong until consumer confidence dropped sharply during the final few months of the year as a result of worsening economic conditions. This highlights how important it is for Government to enact measures to help boost confidence, ’ said Sue Robinson, director of the RMI’s National Franchised Dealers Association.

"Consumers want  assurance from the Government that jobs are secure, that disposable income will not decline further, that general economic conditions will start to improve, and that credit will become more generally available. Once this happens consumers will return to normal buying patterns."

• Paul Philpott, Managing Director of Kia Motors UK, said: “Two years ago we started the process of re-focussing the Kia business in the UK on a strong retail presence and reducing our reliance on expensive buy-back fleet business. We wanted to work in partnership with motivated and profitable dealers and the fact that we have been able to weather the desperate economic conditions that have hit the markets – particularly in the second-half of the year – is testament to that plan.

“Now we have to keep up the effort in order to hit our target of increasing sales in 2009 by another two or three per cent when we expect the market to shrink by a further 15 per cent,” he added.

• “During the late spring of 2008 used car demand was starting to decline, and yet new car registrations simultaneously hit a three-year high, buoyed by sales to fleets who had not yet suffered the ill effects of the downturn,” explained Adrian Rushmore, Managing Editor at EurotaxGlass’s.

“This meant the new and used car markets were running at different speeds, with used car demand totally out of step with the growth in supply. As a result prices fell at a faster rate than at any time in living memory, far surpassing the decline of the early ‘90s.”

Such a severe mismatch of supply and demand is unlikely to be repeated in 2009, suggests Rushmore. “The fall in new car sales since last September has, to some extent, addressed the imbalance seen last year. While new car sales remain at a low level, the supply of used cars entering the market will be more manageable, with fewer adverse effects on residual values.”

While values are expected to be less unstable in 2009, a tangible improvement in demand is not anticipated. “Demand will remain lacklustre for much of the year. Prices for used cars have not yet hit rock bottom and are likely to continue on a downward path for much of 2009,” Rushmore concludes.

• Commenting on the used commercial market, George Alexander, Editor of Glass’s Guide to Used Commercial Vehicles commented:

“For vendors, remaining positive in the face of some fairly scary numbers will require a greater leap of faith.

“If the next couple of months are going to see demand slipping further, at a time when supply grows and business is traditionally slow, then the first requirement is to keep a cool head.

“Therefore, when times are hard, the trick is to offer customers what they need, at prices they can afford.  This may mean selling a wider spread of stock with greater emphasis on the value for money end of the mix, or possibly looking at model types that traditionally were not offered.  

“Dealers holding stock that will not shift, and which already owes them too much money, should put it back into the market.  The cash released can then be invested in vans that will appeal to cash strapped customers.”

“As long as the retailer’s strategy is based on sound business fundamentals, trade will continue and deals can still be finalised.  By being proactive, traders can prevent the domino effect of weakness leading to the wider market grinding to a stop.” 

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