UK August car sales slump but industry pins hopes on 'revenge' buying

The dip mirrors declines car sales elsewhere across Europe including Germany, France and Spain after first gains of the year in July

Jaguar Land Rover, the UK’s largest carmaker, said it would slash costs by £2.5 billion. Courtesy Jaguar Land Rover

Car sales in the UK fell in August, denting hopes of a recovery in the industry after a slump caused by the Covid-19 pandemic.

Vehicle registrations dropped 5.8 per cent to 87,226, according to the Society of Motor Manufacturers and Traders (SMMT).

July brought the UK’s first monthly gain in car sales of 2020, giving some relief as the industry slashed jobs and capacity to deal with the fallout from the pandemic. April had seen car sales plunge to a low not seen since the Second World War.

The dip mirrors declines elsewhere across Europe in Germany, France and Spain although the long-term trend remains unclear because August is typically a quieter month.

“The decline is disappointing, following some brief optimism in July,” said SMMT chief executive Mike Hawes. “With the all-important plate change month just around the corner, September is likely to provide a better barometer.”

What seems far more significant is the outlook for September and beyond, which remains positive

Registrations were down almost 40 per cent in the first eight months of the year, the SMMT said.

But there are hopes that a new phenomenon of so-called revenge buying may help reignite the industry. The phrase refers to financially secure people who buy luxury cars after saving money during the pandemic but were unable to go on holiday abroad.

July’s growth had been driven by pent-up demand as well as commuters looking for alternatives to public transport. There was some optimism that the bump would extend into August if school reopenings and freedom from months of lockdowns reinforced the trend.

“What seems far more significant is the outlook for September and beyond, which remains positive as the industry continues its recovery from lockdown,” Ian Plummer, director at sales site Auto Trader, said in a separate statement.

Consumer visits had increased more than 30 per cent in August from a year earlier, he said.

The SMMT had previously warned that uncertainty about the economy and the UK's exit from the European Union would continue to weigh on carmakers. Last month Jaguar Land Rover, the UK’s largest carmaker, said it would slash costs by £2.5 billion (Dh12.20bn)

One bright spot for the industry has been electric vehicles, with demand more than doubling over the past year.

In August registrations of plug-in hybrids more than tripled while fully electric cars gained 78 per cent. Carmakers now had 83 plug-in hybrid and full electric models on sale in the country, the SMMT said.

The motor society was seeking government incentives to be reintroduced on plug-in hybrids to attract more buyers, as well as binding targets on charging infrastructure. The UK needed 1.7 million on-street charging points to be built by 2030 to keep pace with consumer demand, the SMMT said.

“If the UK is to become a global leader in the drive to net zero, we need industrial as well as market transformation,” Mr Hawes said. “This will require a bold strategy to retain and grow our automotive manufacturing base and attract new investment.”