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UK car sales hit five-year high UK car sales hit five-year high
(about 5 hours later)
UK car sales soared to their highest level since 2007 last year, fuelled by growing consumer confidence, cheap finance deals and PPI compensation payments. UK car sales soared to their highest level since 2007 last year, fuelled by growing consumer confidence, cheap finance deals and payouts from high street banks for PPI mis-selling.
The number of new cars sold jumped 10.8% to 2.26m, the highest level since the financial crisis took hold, according to the figures from the Society of Motor Manufacturers and Traders, and equivalent to 600 more cars sold a day in 2013 compared with 2012. However, the sales glut brought a warning that second-hand car prices could slump within the next two years as the market is flooded with vehicles. The number of new cars sold jumped nearly 11% to 2.26m in 2013, the highest level since the onset of the financial crisis, according to the figures from the Society of Motor Manufacturers and Traders. It was equivalent to 600 more cars sold a day in 2013 compared with 2012, and bucked the trend across much of Europe where sales have been declining. UK sales rose by almost a quarter to 152,918 in December alone.
Prime Minister David Cameron highlighted the rise on Twitter as an example of the growing UK economy. "5 key measures of manufacturing at all-time high & UK car sales top pre-2007 levels. See how we're growing UK economy," he tweeted. Mike Hawes, the SMMT's chief executive, said the car market had been "a bright spot" in the UK economy, helped by cheap finance deals which account for around three quarters of transactions.
British demand has consistently outperformed the rest of Europe where car sales have been declining. Spain was the only other major market to register a growth in sales last year, with volumes up 2.1%, driven by the country's scrappage scheme. The German, French and Italian markets all shrank. He added that while it was difficult to measure the precise impact of Payment Protection Insurance compensation on the car industry, average payouts of around £3,000 were also having an impact. "It's enough to put a deposit down on a car," he said.
The UK has now overtaken France as Europe's second-largest car market behind Germany, having enjoyed 22 consecutive months of growth. Sales rose 23.8% to 152,918 in December alone. John Leech, head of automotive at consulting group KPMG, said that while cheap credit had been great for driving sales, it could store up problems for the used car market "a year or two from now". Leech said there was a danger of an oversupply of used cars building up as consumers opt to return their cars at the end of their three year personal car plan (PCP) deals.
Mike Hawes, the SMMT's chief executive, said the car market had been "a bright spot" in the UK economy, with a number of factors driving growth, including the availability of cheap finance deals which account for around 75% of new car sales. "Car dealers now sell finance with the car where half the price is paid over 36 months and the remaining half is cleared by a bullet payment at the end of the 3 years. This has been great for new car sales as consumers choose to take a new car on another PCP rather than pay the bullet. The danger for car manufacturers and used car dealers is that the supply of three year old cars is starting to ramp up and, maybe in a year or two from now, will exceed demand leading to a potential residual value price crash and increased risk of loan default by consumers," he said.
A breakdown of the figures showed the strongest growth in 2013 was in private car sales, up 19.8% as consumers were feeling more confident against a backdrop of economic growth and falling unemployment, and encouraged by attractive promotions. The SMMT predicted a slowing of growth in new car sales to 1% in 2014, as the rebound in demand from the lows during the recession fades. A breakdown of the figures showed the strongest growth in 2013 was in sales to private buyers, which rose nearly 20% as consumers were feeling more confident against a backdrop of economic growth and falling unemployment and were encouraged by attractive promotions.
The Ford Fiesta was the best-selling new car in the UK last year, followed by the Ford Focus, Vauxhall Corsa, Vauxhall Astra and Volkswagen Golf.The Ford Fiesta was the best-selling new car in the UK last year, followed by the Ford Focus, Vauxhall Corsa, Vauxhall Astra and Volkswagen Golf.
The SMMT said British buying patterns were shifting towards smaller, more fuel efficient models, with "supermini" vehicles taking the largest market share of 35.9% in 2013. Registrations of hybrid and plug-in cars rose 20.5% to 32,715 units. The SMMT said British buying patterns were shifting towards smaller, more fuel efficient models, with "supermini" vehicles taking the largest market share of 35.9% in 2013. Registrations of hybrid and plug-in cars rose 20.5% to 32,715 vehicles.
Hawes said that while it was difficult to measure the precise impact of PPI compensation payments on the car industry, average payouts of around £3,000 were clearly having an impact. "It's enough to put a deposit down on a car," he said. Prime Minister David Cameron highlighted the 2013 sales figures on Twitter as an example of the growing UK economy. "5 key measures of manufacturing at all-time high & UK car sales top pre-2007 levels. See how we're growing UK economy," he tweeted.
The pace of growth in 2013 is not expected to be repeated however, with the SMMT forecasting a more modest 1% rise in new car sales in 2014, as the rebound in demand from the lows during the recession fades. British demand has consistently outperformed the rest of Europe where car sales have been declining. Spain was the only other major market to register a growth in sales last year, with volumes up 2.1%, driven by the country's scrappage scheme. The German, French and Italian markets all shrank.
Separate figures published by the SMMT at the end of January are expected to show UK car manufacturing also rose in 2013, to around 1.5m vehicles from 1.46m in 2012.
Hawes said growth in UK car manufacturing would be sustained for at least two to three years as a result of the investment already pledged by companies including Jaguar Land Rover and Bentley.
British car manufacturing is expected to surpass its previous 1972 peak of 1.92m vehicles in 2017, Hawes said.
Howard Archer, chief UK economist at IHS Global Insight: "The motor industry will be hoping that the recent improvement in UK economic activity is sustained and extended, and that this underpins consumer and business confidence, and their willingness to splash out on new cars."Howard Archer, chief UK economist at IHS Global Insight: "The motor industry will be hoping that the recent improvement in UK economic activity is sustained and extended, and that this underpins consumer and business confidence, and their willingness to splash out on new cars."
Hawes said Britain's continued membership of the European Union would be vital to future investment in the UK car industry. "We need a strong voice to shape regulation in Europe," he added. Top ten cars 2013
1. Ford Fiesta 121,929
2. Ford Focus 87,350
3. Vauxhall Corsa 84,275
4. Vauxhall Astra 68,070
5. Volkswagen Golf 64,951
6. Nissan Qashqai 50,211
7. BMW 3 Series 43,494
8. Volkswagen Polo 42,609
9. BMW 1 Series 41,883
10. Peugeot 208 38,616
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