![The global shortage of chips used in vehicles means manufacturers are unable to produce enough cars to meet demand - and drip-feed of deliveries means registrations are falling way behind the 10-year average](https://i.dailymail.co.uk/1s/2021/08/05/12/46319783-9864491-image-a-9_1628164457881.jpg)
The global shortage of chips used in vehicles means manufacturers are unable to produce enough cars to meet demand – and drip-feed of deliveries means registrations are falling way behind the 10-year average
New car registrations in Britain fell a third annually in July and is down more than a fifth on the decade average for the month as the ongoing global semiconductor chip shortage continues to strangle the motor industry.
Official figures released today show that 123,296 new passenger vehicles were bought in the UK last month, which is 29.5 per cent fewer than a year ago and the lowest volume of registrations in July for 23 years.
The Society of Motor Manufacturers and Traders said the size of the decline has been artificially inflated due to a huge surge in vehicle sales in July 2020 – the first month motor dealers were allowed to reopen their doors to the public following the initial national Covid-19 lockdown.
However, sales were still 22.3 per cent down on the 10-year average for the seventh month of the year, despite there being plenty of demand for brand new cars.
Industry bosses have blamed the decline in registrations on both the global chip shortage and lower factory outputs as a result of the ‘pingdemic’.
But while the logjam of deliveries caused by the worldwide lack of semiconductors is without questions causing huge delays for customers waiting on the arrival of new motors, the argument for a shortage of staff is only true of British built vehicles.
The stats show that the decline in registrations was predominantly driven by shrinking deliveries to large fleets which, at 61,140 units, was more than a quarter (28.7 per cent) down on the average recorded over the past decade.
Private registrations declined by a lesser extent, falling by 10.7 per cent to 59,841 new cars, though with the shortage of chips predicted to run into 2022, these figures could fall off even further for the remaining five months of the year.
As a result, the latest SMMT outlook has been revised downward and now forecasts registrations to reach around 1.82 million units in 2021.
This is still some 11.7 per cent up on 2020, but down from the 1.86 million forecast in April, and a massive 21.8 per cent off the average new car market figures dating back to 2010.
![Official figures released this morning show that 123,296 new passenger vehicles were bought in the UK last month, which is 29.5% fewer than a year ago and the lowest volume of registrations in July for 23 years](https://i.dailymail.co.uk/1s/2021/08/05/12/46319789-9864491-image-a-10_1628164526084.jpg)
Official figures released this morning show that 123,296 new passenger vehicles were bought in the UK last month, which is 29.5% fewer than a year ago and the lowest volume of registrations in July for 23 years
![The stats show that the decline in registrations was predominantly driven by shrinking deliveries to large fleets](https://i.dailymail.co.uk/1s/2021/08/05/12/46319791-9864491-image-a-11_1628164551318.jpg)
The stats show that the decline in registrations was predominantly driven by shrinking deliveries to large fleets
Mike Hawes, SMMT chief executive, said: ‘The automotive sector continues to battle against shortages of semiconductors and staff, which is throttling our ability to translate a strengthening economic outlook into a full recovery.
‘The next few weeks will see changes to self-isolation policies which will hopefully help those companies across the industry dealing with staff absences, but the semiconductor shortage is likely to remain an issue until at least the rest of the year.
‘As a result, we have downgraded the market outlook slightly for 2021.’
Richard Peberdy, UK head of automotive at KPMG, said the volumes in car registrations published today are not ‘reflective of the real demand picture’.
He explained: ‘When you dive deeper into the data it is clear that supply chain challenges have supressed production and extended carmakers’ delivery times. Quite simply, fewer cars are getting onto forecourts.’
![Richard Peberdy, UK head of automotive at KPMG, said the volumes in car registrations published today are not 'reflective of the real demand picture'](https://i.dailymail.co.uk/1s/2021/08/05/12/46319785-9864491-image-a-13_1628164642221.jpg)
Richard Peberdy, UK head of automotive at KPMG, said the volumes in car registrations published today are not ‘reflective of the real demand picture’
Ian Plummer, commercial director at Auto Trader echoed Mr Peberdy’s comment.
‘It would be easy to misinterpret these results as a drop in consumer demand for new cars, but our data shows that that couldn’t be further from the truth.
‘In fact, 1.4 million people viewed a new car on Auto Trader in July, which is up six per cent compared to last year’s post lockdown July sales burst and more than double 2019 levels.
‘With such strong demand, we’re clearly in the grips of a ‘seller’s market’ at the moment, although the potential lost sales make the supply constraints all the more frustrating for car brands and retailers alike while they’re unable to reap all the benefits of this bounce back.’
As reported last month by This is Money, the knock-on effect of limited new car deliveries has forced many impatient drivers to scour the second-hand market for their replacement motors.
Plummer says Auto Trader found that three quarters of car buyers are prepared to buy a used car if their brand-new choice wasn’t available – though this huge surge in demand has pushed used car prices up a record 14.1 per cent year-on-year. He said this is ‘a trend which we may begin to see in the new car market too’.
The drip-feed of deliveries of new models is now starting to impact on sales volumes per model, with the Volkswagen Polo the most-bought new car in July, ahead of the Toyota Yaris and Kia Sportage.
The Vauxhall Corsa – the best-selling car so far this year – didn’t make it into the top 10, while the most popular model for the last 12 years – Ford’s Fiesta – languished down in ninth spot, showing just how volatile the standings have become under the constraints of supply issues.
![The VW Polo supermini was the best-selling new car of July, with just over 3,000 registrations](https://i.dailymail.co.uk/1s/2021/08/05/13/46320111-9864491-image-a-36_1628165020449.jpg)
The VW Polo supermini was the best-selling new car of July, with just over 3,000 registrations
![The Vauxhall Corsa remains the nation's most-bought new car in 2021, though Ford's Fiesta has closed the gap in July with its rival not featuring in the top 10 most-registered models](https://i.dailymail.co.uk/1s/2021/08/05/12/46319797-9864491-image-a-14_1628164660890.jpg)
The Vauxhall Corsa remains the nation’s most-bought new car in 2021, though Ford’s Fiesta has closed the gap in July with its rival not featuring in the top 10 most-registered models
SMMT also confirmed that the chip shortage is beginning to have a toll on the new van market, which posted its first decline since December 2020 as July registrations fell 15 per cent due to a lack of new model supply.
Jim Holder, editorial director of magazine and website What Car?, said: ‘The appetite for car buying is clearly there, particularly as people reward themselves after lockdown.
‘But the challenge is for manufacturers and retailers to manage customer expectations and to build pipelines in the meantime, while supply is limited.
‘Ultimately, the supply issues will lift – but only those who have invested in servicing customer expectations will be in a position to reap the rewards as they do so.
Electric car sales remain on upward trajectory
The recent bumper growth in plug-in vehicles continued in July, with battery electric vehicles (BEVs) accounting for 9 per cent of registrations, while plug-in hybrids (PHEVs) reached 8 per cent of market share.
SMMT now estimates that BEVs will account for 9.5 per cent of registrations by year end, while PHEVs are forecast to comprise 6.5 per cent of the market, collectively totalling around 290,000 units by the end of the year.
Mr Hawes described the rising sales of electrified vehicles as a ‘bright spot’ in the statistics and a reflection of consumers responding in ever greater numbers to ‘new technologies, driven by increased product choice, fiscal and financial incentives and an enjoyable driving experience’.
![SMMT estimates BEVs will account for 9.5% of registrations by year end and PHEVs will comprise 6.5% of the market, collectively totalling around 290,000 units by the close of 2021](https://i.dailymail.co.uk/1s/2021/08/05/12/46319803-9864491-image-a-12_1628164569374.jpg)
SMMT estimates BEVs will account for 9.5% of registrations by year end and PHEVs will comprise 6.5% of the market, collectively totalling around 290,000 units by the close of 2021
KMPG says the increase in sales is a direct result of more companies offering salary sacrifice schemes to their staff for these vehicles, often making the choice as affordable as petrol or diesel, which is a major tipping point for the battery electric vehicle sector.
However, it warned that the rapid rate of development of EVs could mean today’s plug-in cars suffer above average depreciation as motorists look to versions with longer ranges and shorter charge times.
‘Interestingly, demand for electric vehicles may drive a bigger shift towards leasing and subscription models in the medium term versus outright ownership,’ Peberdy explained.
‘The technology is advancing quickly, with increasingly efficient and longer range vehicles set to roll off production lines soon.
‘This risks a faster depreciation of today’s models for consumers. Customers may want greater visibility and assurance over resale values and the total cost of ownership.’