Ray of hope for motor sector as car sales rise 1.4 per cent year-on-year in February

This was the first year-on-year increase in car sales since last August.

The sector benefited from a second successive rise in private car sales, which may have been helped by a recent pick-up in consumer purchasing power. Fleet sales continued to decline in February, albeit at a reduced rate.

February’s small rise followed a modest 1.6 per cent decline in January and an overall fall of 6.8 per cent in 2018. February is traditionally a quiet month for car sales as it precedes March which is a major month for sales due to the change in number plates.

A concern for the automotive sector is that the risk of a “no deal” UK exit from the EU at the end of March may cause businesses and consumers to be cautious over making car purchases during the key month. 

New car sales have been driven down by a number of road blocks - dwindling demand for diesel cars, stricter emission regulations leading to supply problems since September and more cautious consumers and businesses.

Diesel sales fell 14.3 per cent year-on-year in February as they continued to be impacted by environmental concerns and uncertainty over government action to counter this. In contrast, sales of alternative-fuelled vehicles rose 34.0 per cent year-on-year in February.

On the private car sales front, the increases in February and January suggest the automotive sector can take some hope from currently improving real earnings growth. Indeed, real earnings growth is now up close to 1.5 per cent, the best level since late-2016. Also helping matters, employment rose a robust 167,000 in the three months to December to be at a record high of 32.597m

Nevertheless, a number of factors may limit private car sales. Despite the recent improvement, consumer purchasing power is still relatively limited compared to past norms while confidence is currently weak and fragile. Furthermore, lenders have cut back on the availability of unsecured consumer credit.

Car manufacturers remain particularly vociferous over the impact that a “no deal” Brexit could have in disrupting their supply chains.

Mike Hawes, SMMT chief executive, said: “It’s encouraging to see market growth in February, albeit marginal, especially for electrified models. Car makers have made huge commitments to bring to market an ever-increasing range of exciting zero and ultra low emission vehicles and give buyers greater choice. These cars still only account for a fraction of the overall market, however, so if the UK is to achieve its electrification ambitions, a world-class package of incentives and infrastructure is needed. The recent removal of the plug-in car grant from plug-in hybrids was a backward step and sends entirely the wrong message. Supportive, not punitive measures are needed, else ambitions will never be realised.”