UK car sales fall by 7% through 2018

15 January 2019 Consultancy.uk

The UK has endured a 7% fall in car sales throughout 2018, new figures have revealed. While Brexit is predictably being cited as a cause of this, however, a number of factors are at play in the UK and across many of Europe’s leading economies, as a number teeter on the brink of recession ahead of a turbulent 2019.

Even with so little time left before the Brexit process comes to a head, the final effects of Britain’s withdrawal from the EU on the UK economy remain hard to divine. The process has been complex, cumbersome and for a range of industries, costly. One estimate by Bain & Company puts the cost of the leaving for the automotive industry at a £2 billion loss in profits. With the potential for the UK leaving without an agreement seemingly growing by the day, the hit the industry is in line to take could rise further, though.

According to a recent study by Deloitte, a possible No Deal scenario would almost certainly lead to stringent tariffs being levelled on trade with the UK, while a resulting crash in the value of the British pound would compound this, making British companies less able to purchase imports. The impact of a No Deal scenario coming to fruition has a much farther reach than the white cliffs of Dover, however. These sales slumps would then impact the supply chain indirectly, lowering revenues for German suppliers, which they would probably seek to recoup via job cuts. The knock-on effect could endanger up to 14,000 of the 42,500 jobs in Germany’s car industry.

West European annual car sales (million units)

Indeed, further down the supply chain, automotive retailers are already feeling the pinch. Comparing December 2018 with the same month in the previous years, West European car registrations fell by 8.5% year-on-year, according to data released by automotive focused market intelligence services provider LMC Automotive. Full-year registrations across Western Europe were down 0.7% on the previous year, with a total of 14.2 million units sold. The news represents the first annual decline since 2013, when three years of slowing global economic growth had impacted sales.

According to LMC Automotive’s figures, sales are likely to rebound in 2019, however only by roughly the same number they fell by in 2018. However, considering the West European automotive market had booked strong growth of 24% between 2013 and 2017, this is far from a robust response. This is particularly worrying, as LMC Automotive also admitted that the possible 2019 recovery was based on the assumption a No Deal Brexit was avoided – otherwise Western European sales could fall again in 2019.

Speaking to the press about the results, LMC analyst Jonathon Poskitt warned that they might reflect the region's economic situation as a whole, stating, "The latest economic data is not very reassuring… We have seen a slowdown in the major economies of the region in the latter part of 2018 and it threatens a loss of momentum in 2019. Global economic developments have not helped but there are also a number of region-specific risks – Brexit is one of course, but on-going difficulties for some Eurozone economies could put additional strains on the region's financial system."

Europe on brink

While Brexit woes unquestionably retain top-billing in the UK, then, other factors are also at play in the continent’s second largest automotive market. Britain saw sales decline by 6.8% year-on-year, or more than 173,000 purchases, by the end of 2018. This makes the UK the joint poorest performer in Western Europe, alongside Norway and Sweden – with both Scandinavian nations having seen a large fall in GDP growth in the last year.

With regards to the drop in sales in Britain, consumer industries and the retail sector across the UK saw disappointing results throughout the last year, to say the least, resulting in a number of high-profile administrations. It would not be out of the question to expect that the potent blend of spiralling debts, climbing business rates, and crippling costs related to a weakened pound triggered by Brexit which led to this have subsequently also hit the automotive sector.

Uncertainty impacts on falling UK car sales

According to the Society of Motor Manufacturers and Traders, this represents the second year of decline for UK automotive sales in a row. According to that study, sales peaked in 2016 – the year of the Brexit referendum – at 2.7 million units, before falling to 2.5 million in 2017. The rounded figure of 2.4 million in 2019 suggests that with notable uncertainty ahead in 2019, the downward trend may well be set to continue for the UK.

Elsewhere, while France saw a total increase in sales for the year of 3%, 2018 closed with a disappointing 14.5% year-on-year fall in December, as the country continued to be rocked by the ‘gilet jaunes’ demonstrations in Paris. As Germany continues to negotiate a difficult period, as political instability and fears of a recession sparked by poor production stalk the nation, the German auto-market saw a contraction of 0.2% in 2018 as a whole. Italy also saw a 3.1% full-year decline, as the Mediterranean nation likewise finds itself on the brink of recession, with GDP currently shrinking for first time in four years.

At the other end of the scale, though, Greece saw the highest level of growth in automotive sales in 2018. The nation – which finally saw eight crisis-filled years of austerity forced by its Eurozone bailout come to an end – saw sales spike by 18.5%. Spain similarly saw a jump of around 7%, in line with the Netherlands, which, according to a report by Roland Berger, is the world’s best placed country to survive automotive disruption. With Brexit likely to hit the Dutch market hard thanks to its close proximity, many in the Netherlands will hope its continued automotive sales are a sign of this being accurate.  

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