UK new car sales slumped by 97% in April to the lowest level of any month since February 1946 with factories and dealerships shut due to the COVID-19 outbreak.
This is according to The Society of Motor Manufacturers and Traders (SMMT), which reported new car sales fell 97.3% year-on-year in April to just 4,321 vehicles. The industry trade body also downgraded its full year forecast to 1.68m registrations compared with last year’s total of 2.31m cars.
SALES GRIDLOCK
Lockdown measures have been in place across Europe since mid-March to contain the coronavirus pandemic, leading to the closure of many businesses, curbing people’s movements and driving a decline in new car sales not seen since Britain was battling to recover from the destruction of World War Two.
As Shares outlined here in October, the UK new car sector was struggling even before coronavirus brought activity to a virtual standstill.
Today’s dire sales data demonstrates the pressure that quoted dealership groups including hard-pressed Pendragon (PDG), whose merger overtures have been spurned by Lookers (LOOK), Vertu Motors (VTU:AIM), Cambria Automobiles (CAMB:AIM) and family-owned Caffyns (CFYN) are currently under.
They will be wondering how much demand will recover once the lockdown eases and dealerships re-open. The near-term fundamentals for consumer spending have taken a substantial downturn as a result of coronavirus and consumers will likely prove to be far more cautious in committing to big-ticket purchases such as new cars given the current economic environment.
WHAT THE EXPERTS ARE SAYING
According to Howard Archer, chief economic advisor to the EY ITEM Club, April’s savage decline followed ‘a drop of 44.4% year-on-year in the key month of March (due to number plate changes) to 254,684 vehicles as coronavirus had an increasingly negative impact on consumer and business behaviour culminating in the lockdown on 23 March when car showrooms were closed.’
James Fairclough, chief executive of AA Cars, commented: ‘Those consumers who are in the market to buy a new car when the lockdown period ends may find there are some very competitive deals and offers available to facilitate their purchase. However, it is unclear whether the same levels of credit will be available to customers who want to use car finance options.’
Fairclough continued: ‘For other consumers, a new car purchase will now understandably be much lower down on their priority list - especially for those struggling with direct economic consequences of the pandemic, or those with reduced job security.
‘Down the line, there are likely to be calls for the Government to offer additional incentives to get people buying new cars again. For the moment, all the industry can do is sit tight and wait for the news that forecourts can open again.’
