The UK’s automotive sector experienced a “bumper September,” with new car registrations showing promising growth both for the month and year-to-date (YTD). According to the Society of Motor Manufacturers and Traders (SMMT), new car registrations in September 2023 surged by 21.0%, while YTD figures were up by 20.2%.
This positive momentum is undoubtedly encouraging news for the industry. However, it’s essential to recognise that these numbers, although impressive, are still 42.0% lower than the peak seen in September 2016, indicating the challenges the automotive market continues to face.
In this article…
Battery Electric Vehicle (BEV) Market Stagnation
Government Policy and BEV Mandates
Growth and Decline in Major Brands
The UK’s Automotive Market Continues to Evolve
Navigate the Ever-changing Landscape of the Automotive Industry

Fleet Sales Dominate
One striking trend in the current market landscape is the significant tilt toward fleet sales, which have risen by 42.3% YTD. This shift can be attributed to car manufacturers’ focus on sales to private companies during the chip shortages. As a result, the YTD market share of fleet sales has now returned to a level comparable to YTD 2019 (52.8% compared to 52.4%). Conversely, private demand has seen minimal growth, up just 1.8%. Rising car prices and higher interest rates have made Personal Contract Purchase (PCP) financing less accessible to private buyers.

Battery Electric Vehicle (BEV) Market Stagnation
Another noteworthy trend is the apparent stall in Battery Electric Vehicle (BEV) growth. Despite their appeal to fleets due to tax advantages, BEV’s market share has not grown substantially and dipped slightly in September. This stagnation can be partially attributed to a significant drop in BEV sales to private buyers in September 2023, down by 14.3%. BEVs accounted for less than 10% of retail sales during this period.

Government Policy and BEV Mandates
Two significant factors contribute to the uncertainty surrounding BEV growth. First, there is a public perception that the government’s emphasis on BEVs has waned since the announcement of an extended deadline for phasing out petrol and diesel cars to 2035. However, car manufacturers are still under pressure to sell BEVs, with mandates set at 28% of vehicles being BEVs by 2028 and 80% by 2030.

Market Distortion Risks
The market faces the risk of distortion as an increasing number of fleet cars will ultimately return to the used car market, potentially misaligning with what private buyers actually want. This could lead to a drop in the value of used BEVs, resulting in higher running costs. This may deter private buyers from purchasing new BEVs, raising concerns about car companies meeting their BEV targets.

Impact on EV Prices
Auto Trader’s Retail Price Index for October reported a 19.6% decrease in EV prices compared to the previous year. While the report indicates that prices are stabilising, the influx of more fleet EVs into the used car market in the coming years may exert further downward pressure on prices.

Manufacturer Insights
The landscape has evolved regarding manufacturers, with Volkswagen (VW) currently leading the market. However, it’s interesting to note that VW doesn’t have a single model in the Top 10 for September or YTD. Unlike in the past, when Ford and models like the Escort, Focus, or Fiesta dominated, being No.1 now requires a diverse range of decent-selling models across various segments.

Ford’s Narrow Range
Despite the Ford Puma becoming the UK’s best-selling car for the first time since 2020, Ford’s narrow mainstream range, consisting of just two crossovers and one hatchback, prevents it from reaching the No.1 position.

Audi’s Success
On the other hand, Audi has seen increased market share this year, primarily driven by the A3, which has become the UK’s best-selling C-segment hatchback, surpassing the Golf and Focus.

Challenges for Kia
While currently in fourth place, Kia faces the challenge of maintaining its position amid competition from Toyota in the short term and a growing list of Chinese brands in the medium term. Kia’s rapid growth in the UK market underscores the brand’s significance and the need to protect its position.

Other Notable Brands
BMW has seen a decline in market share, with sales of the 3-Series and the X3 falling. Surprisingly, the new Polestar 2 has outsold the 3-Series YTD, highlighting the evolving competitive landscape.
Vauxhall has experienced a slight setback, primarily due to Astra’s struggle to gain traction in the market. Astra’s challenges indicate a need for strategic adjustments to navigate the competitive landscape effectively.
Despite growing market share, Nissan has not yet reached the levels seen a decade ago. Further sales growth will likely depend on new models, with a BEV crossover expected in 2026.

Growth and Decline in Major Brands
Among major brands, Cupra, MG, and Porsche have shown significant growth YTD, with Fiat, BMW, and Dacia experiencing lower growth rates.

Emerging Mid-Sized Brands
Outside the Top 10, MG, Skoda, and Volvo have performed well. MG’s growth can be attributed to the MG4 while rising sales of models like the Karoq, Enyaq, and Octavia drive Skoda’s success. After discontinuing saloons and estates in the UK, Volvo is achieving success with its crossovers, particularly the XC40.

New European Entrants
Two noteworthy newcomers, Polestar and Cupra, have experienced substantial growth, illustrating the increasing volatility of the UK car market. However, their success also underscores the importance of delivering on brand promises to sustain growth.

The UK’s Automotive Market Continues to Evolve
There are notable shifts in consumer preferences, government policies, and manufacturer strategies. While September’s sales figures may have offered hope, challenges remain, particularly in the BEV segment and the potential market distortion caused by fleet sales. Manufacturers must navigate these challenges strategically to maintain or improve their market positions in this dynamic landscape. As the market continues to change, only time will reveal which brands will thrive and which will face the challenges of the evolving automotive sector.
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