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SMMT calls for new policies to boost fleet renewal as new car demand drops

SMMT calls for new policies to boost fleet renewal as new car demand drops

Policies to boost fleet vehicle renewal have been demanded by the Society of Motor Manufacturers and Traders (SMMT) in the wake of last week’s Budget Statement and a further decline in new car registrations.

New car registrations fell 2.9% last month to 153,599 units (October 2017: 158,192) as model changes and backlogs at test houses conducting tough new Worldwide harmonised Light vehicles Test Procedure (WLTP) emissions certification continued to cause shortages across some brands.

Fleet registrations fell 5.2% to 79,611 units (October 2017: 83,955), while private sector demand dropped 1% to 69,231 units (October 2017: 69,913) and business sector demand, perhaps surprisingly, increased 10% to 4,757 units (October 2017: 4,324).

Diesel demand, according to the data published by the SMMT, continued to fall month-on-month - down 21.3% on 12 months ago to 49,061 (October 2017: 62,366). Meanwhile, petrol demand increased 7.1% to 93,941 (October 2017: 87,720) and registrations of alternative fuel vehicles increased 30.7% to 10,597 units (October 2017: 8,106) to take a 6.9% market share.

Zero emission battery electric vehicles saw particularly impressive growth, up 86.9%, as 584 more people drove one home than in the same month last year, said the SMMT.

Hybrid and plug-in hybrid vehicles, which make up the majority of alternative fuel vehicle sales due to their greater flexibility, also enjoyed strong uplifts, growing 31% and 19.1% respectively.

However, said the SMMT, that was not surprising given last month’s government announcement that the Plug-in Car Grant was to be cut for pure electric cars and withdrawn completely for plug-in hybrids - although, due to lead times, the full impact may not be seen for several months, said the organisation.

In the first 10 months of 2018, new car registrations are 7.2% down at 2,064,419 (2017: 2,224,603) with the SMMT saying that it hoped that the gap narrowed slightly as supply issues resulting from the WLTP regulatory changes eased.

The SMMT said: “Pending no further market disruption, some pull-back is hoped for during the remainder of the year as current supply issues ease, enabling manufacturers to cater for pent up demand on certain models.”

The biggest new car registration decline is in the fleet sector - down 7.8% to 1,054,532 (2017: 1,143,956). Business sector demand is down 7.1% to 81,550 units (2017: 87,757) and private segment registrations are down 6.5% to 928,337 (2017: 992,880).

Diesel demand has dropped 30.7% this year with registrations totalling 656,273 (2017: 946,571), with petrol volume up 9.2% at 1,286,540 (2017: 1,178,169) and alternative fuelled vehicle registrations up 21.8% to 121,606 (2017: 99,863).

The figures were published as the SMMT announced new industry forecasts for alternative fuel vehicle demand, with registrations expected to grow by 82.5% from 2017 levels by 2020.

Similar growth (88.3%) is projected for plug-in electric cars, with 92,620 new plug-in hybrid and battery electric cars expected to be sold in the same year - taking market share to around 4%.

However, said the SMMT its forecasts were at the lower end of the government’s 3-7% stated ambition, with cuts to the Plug-In Car Grant further undermining industry’s ability to deliver that ambition.

The SMMT estimates that 2018 new car registrations will total 2.381 million units, down from 2.541 million units last year and 2.693 million units in 2016. Next year, the SMMT estimates that new car demand will reduce further to 2.325 million units with a further slight drop to 2.302 million units in 2020.

SMMT chief executive Mike Hawes said: “Vehicle Excise Duty upheaval, regulatory changes and confusion over diesel have all made their mark on the market this year so it’s good to see plug-in registrations buck the trend. Demand is still far from the levels needed to offset losses elsewhere, however, and is making government’s decision to remove [Plug-In car Grant] purchase incentives even more baffling.

“We’ve always said that world-class ambitions require world-class incentives and, even before the cuts to the grant, those ambitions were challenging. We need policies that encourage rather than confuse. Government’s forthcoming review of WLTP’s impact on taxation must ensure that buyers of the latest, cleanest cars are not unfairly penalised else we will see older, more polluting cars remain on the road for longer.”

Ashley Barnett, head of consultancy at Lex Autolease, the UK’s largest vehicle leasing and fleet management company, said: “October’s decline is not unexpected. As it stands, company car drivers who renew now are doing so without knowing the tax consequence beyond 2021. It is positive that more clarity will come in spring, but the uncertainty in the interim will make it difficult for drivers and fleet decision makers to commit to fleet replacements.

“We recommend that fleet operators consider extending existing agreements until the outcome of the WLTP consultation is known, or consider electing for an interim three-year replacement cycle. This would give them a clearer insight into the tax regulations beyond 2021 and most likely a better view of the additional zero-emission technology that will be available the next time they renew.  There may be an extra cost in the short term, but these measures would leave their fleet better placed to adopt newer, cleaner technology in 2021.

“Alternatively, employees may decide that company cars are unattractive in light of this tax uncertainty, the unintended consequence being that many may be pushed towards a less-regulated ‘grey fleet’ environment. In this scenario, higher emissions and safety issues create new challenges, and progress against the government’s ‘Road to Zero Strategy’ is slowed.”
  • Demand for new light commercial vehicles increased in October, according to the latest figures released by the SMMT. More than 28,000 vans and pick-ups joined British roads in the month, representing a 14.1% increase in registrations, as demand continued to fluctuate throughout 2018. Growth was driven by a rise in demand for the popular 2.5-3.5 tonne van, up 27.6% to take a 70.1% share of the market, while demand for pick-ups increased 3.2%. In contrast, small and medium-sized vehicles both experienced declines, down 24.9% and 14.8% respectively. The rise followed months of fluctuating registrations caused by variations in fleet buying cycles and business confidence. Year-to-date, 302,741 new light commercial vehicles have been registered, representing a drop of 1.6% on the first 10 months of 2017, and in line with current forecasts. However, demand remains at a high level, up a third (33%) on the same period in 2013. Mr Hawes said: “While it is positive to see a boost for new vans in October, the growth comes on the back of a turbulent 10 months, with ongoing fluctuations in demand. Although the sector remains strong, we expect this trend to play out over the remainder of the year, as ongoing political uncertainty affects business confidence and hence operator investment.” The SMMT estimates that van registrations will total 352,000 this year, down from 2017’s 362,000. Further reductions are expected next year and in 2020 with forecasts of 340,000 and 337,000 registrations respectively.