Car registrations are on course to hit a 38-year low in 2020 as dealers in England are forced to bolt their doors to customers for the second time this year from today.
Latest figures from the Society of Motor Manufacturers and Traders showed that new vehicle sales slipped by a mere 1.6 per cent in October, suggesting some stability was returning to the market.
However, new lockdown measures requiring showrooms to shut down for November will be a hammer blow to the sector, with the trade body projecting it will knock a further 100,000 registrations off the book by the end of December with full-year sales falling to their lowest level since 1982.
Off limits: Car showrooms in England have been forced to close for a month from today as part of the second national lockdown. The motor industry says it will wipe a further 100,000 registrations off the books and see sales fall to their lowest level since 1982
The industry recorded 140,945 new registrations last month, down from 143,251 in 2019.
While this was a relatively strong monthly performance for the sector given the strain of the Covid-19 pandemic during the year, the SMMT confirmed it was still the weakest October since 2011 and sales were down 10 per cent compared to the average tenth month for the last decade.
It said the industry was on course to record a registrations increase last month, however the ‘firebreak’ lockdown in Wales derailed sales.
In Wales alone, registrations fell by a quarter (down 25.5 per cent) as dealers closed their showrooms from 6pm on Friday 23 October – and remain off limits until Monday.
But it’s the four-week lockdown enforced in England from today that is going to have the biggest impact on an already struggling sector.
As of mid-October, the industry had been expecting to register about 1.66 million new cars in 2020.
However, the second lockdown – that demands for showrooms to be closed – has seen market forecasts projected down by a further 100,000 units to 1.56 million.
This would equate to a total year-on-year decline of around 750,000 registrations and a £22.5 billion loss in turnover for the UK motor sector.
It also means that 2020 is now on course to be the weakest year for the industry since 1982.
October sales slipped by 1.6%. In Wales alone, registrations fell by a quarter as dealers – including Motorline Toyota in Newport (pictured) – closed their showrooms for the ‘firebreak’ lockdown from 6pm on Friday 23 October
The November lockdown in England comes as the market had shown signs of stabilising last month. Already for the year registrations are behind by 31%
Mike Hawes, SMMT chief executive, said: ‘When showrooms shut, demand drops, so there is a real danger that with England today entering a second lockdown, both dealers and manufacturers could face temporary closure.
‘What is not in doubt, however, is that the entire industry now faces an even tougher end to the year as businesses desperately try to manage resources, stock, production and cashflow in the penultimate month before the inevitable upheaval of Brexit.
‘Keeping showrooms open – some of the most Covid-secure retail environments around – would help cushion the blow but, more than ever, we need a tariff-free deal with the EU to provide some much-needed respite for an industry that is resilient but massively challenged.’
While dealers won’t be able to welcome customers to their showrooms until 2 December at the absolute earliest, they can continue to operate ‘click & collect’ services – as they did in May when the first lockdown was in place.
The entire industry now faces an even tougher end to the year as businesses desperately try to manage resources, stock, production and cashflow
Mike Hawes, SMMT chief executive
This means buyers can place their orders for cars with dealers via phone or online and pick-up their new motors from the dealer’s site, though not be allowed indoors and have to take delivery of the vehicle under social-distancing measures,
The SMMT said this should ‘help prevent a return to the sales wipe-out experienced in the spring’, though warned that it will ‘not offset the loss of custom from the closure of showrooms themselves, given the unique nature of the car purchase process’.
With other businesses such as garden centres being allowed to remain open, Sue Robinson, chief executive of the National Franchised Dealers Association blasted the Government’s decision to close car showrooms.
‘Vehicle showrooms were the first industry sector to reopen on 1 June, operating to Covid-secure guidelines,’ she said.
‘There is no evidence that dealerships have caused the spread of Covid-19 and shutting showrooms for four weeks can damage the livelihoods of the 590,000 people employed in vehicle retail as well as the 168,000 people employed in vehicle manufacturing.’
The SMMT said that despite sales last month being almost flat year-on-year, the 1.6% drop means it was the weakest October since 2011
Experts say car dealers in England are better prepared to cope with a second-round lockdown, with many have ‘click & collect’ provisions in place so customers can order their cars online and collect them under social-distanced measures
Michael Woodward, UK automotive lead at Deloitte, said showroom closures have come at a time when consumer spending is on a ‘knife edge’.
‘Uncertain economic conditions and the prospect of further unemployment means consumers continue to put off major purchases. Dealers and manufacturers will have to work hard to convince prospective buyers that they are getting value for money when restrictions eventually lift,’ he said.
There is no evidence that dealerships have caused the spread of Covid-19 and shutting showrooms for four weeks can damage the livelihoods of the 590,000 people employed in vehicle retail
Sue Robinson, chief executive of NFDA
Rachael Prasher, managing director of What Car? magazine, added that while the lockdown will be damaging to retailers they will ‘crucially’ be better prepared for coping with hands-off sales.
‘Many have invested in online portals and sales systems, while live one-on-one video tours are now available through several manufacturers and retailers, helping buyers move their vehicle purchase online,’ she told This is Money.
‘Our research shows 35 per cent of in-market buyers are willing to buy their next car in this way.
‘We expect to see online transactions and deliveries grow in the new and used car sectors, with both customers and retailers becoming more familiar and comfortable with the concept. However, as next month’s registrations will undoubtedly show, it isn’t going to a sufficient substitute for showrooms just yet.’
The Mercedes-Benz A-Class was the best-selling model in October. It’s the first time in its history that it has topped the UK sales charts
The Ford Fiesta slipped to third in the October standings for the most popular news cars in the UK. It is still on course to be the best-selling model for the 12th successive year, but the Vauxhall Corsa is hot on the heels
Commenting on the projected figure for the motor industry, Karen Johnson, head of retail and wholesale at Barclays Corporate Banking, said UK car dealers will at least be relieved that the lockdown isn’t coinciding with one of their busiest trading periods.
‘They’ll now be hoping that consumer appetite for spending on big ticket purchases will have grown by the time the UK comes out of a widespread lockdown, and sales can pick up lost trade as we head into the festive period.’
In October, the best-selling car in the UK was the Mercedes-Benz A-Class – the first time the premium hatchback has topped monthly sales charts in its history.
The nation’s favourite motor for the last 11 years – the Ford Fiesta – slipped to third in registrations volumes last month, also being overtaken by the new Vauxhall Corsa.
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