By Richard Yarrow
This is the time when the SMMT updates its forecast for new car sales for the year ahead, combining it with an early prediction for the following 12 months as well.
The short-term prognosis is good.
The 2013 annual total has been revised in the right direction, up to 2.057 million units.
If it proves correct, that would be more than 10,000 up on the 2012 total.
It’s also a rise from the last quarterly prediction, published in October, which suggested 2.015m sales for this year.
Last year, the UK’s new car market grew 5.3% to 2.044m units, the best result since the recession struck in 2008.
The SMMT’s latest prediction suggests retailers will build on this positive trend, ending 2013 up on 2012’s final figure by 0.6%.
Commenting on the forecast before his departure in January, SMMT chief executive Paul Everitt said: “We anticipate the market will hold firm, with manufacturers and dealers working hard to deliver quality and value to motorists.”
For the longer term – and some in the industry will suggest that guessing Saturday’s Lottery numbers is easier – the news is also positive.
For 2014, the prediction is 2.111m units, up 2.6% on the latest forecast for this year.
It’s slow, steady and hopefully sustainable growth.
The SMMT’s market analysis is based on a survey of member manufacturers’ sales estimates, and is an average of their figures.
But what do others in the industry think?
Tim Peake, group strategy director at Trader Media Group, believes the SMMT is underplaying the market’s potential.
“We are expecting new car registrations to reach 2.1m in 2013, up 2.7%, and it will be driven by continued growth in the private sector, as well as recovery in the fleet registrations that started to pick up in the last few months of 2012.”
Peake argues that with two-thirds of respondents to an Auto Trader survey citing motoring costs as their main economic concern, the 2012 market hit his expectations of growth.
That’s because motorists were keen to swap to newer and more fuel-efficient cars.
He also says the registrations reflect real-world demand rather than OEM/dealer pre-registrations – and it’s a demand that will continue.
However, it comes with a warning.
“For growth over the next few years to be consistent, the economy does need to recover, with GDP needing to settle above the 2% mark.
That will help new car registrations to get back to pre-recession levels of more than
The European effect
Peake argues that recovery in new car sales is critical for the used
car market, which is suffering from reduced supply of good quality, young stock.
“The big unknown on all of this is how well sterling does against the Euro in 2013 and the impact this has on the overall attractiveness of the UK market for OEMs.”
Shwetha Surender, a senior research analyst at forecaster Frost & Sullivan, noted the UK was the only western European market that witnessed an increase in new car sales in 2012 of higher than 3%.
“Weak demand in the rest of Europe has induced vehicle manufacturers and dealers to offer attractive incentives in the UK, further pushing sales,” she explained.
The western Europe light vehicle market shrank by 8.5% in 2012, largely due to the serious impact of the Euro crisis on Italy and Spain, as well as its more subtle effect on larger markets like Germany and France. Surender said the UK economy as a whole was less affected, improving consumer confidence and, again, boosting new car sales.
“In 2013, the UK automotive market is expected to continue to grow at a rate of 2%, and overtake France to become the second largest car market in Europe after Germany,” she added.
“According to the SMMT, an estimated £6 billion has been earmarked for investment in the UK’s auto industry, which we expect to contribute to the growth in 2013.”
Surender said weak sales in the used car market in recent years had led to price rises during 2012.
“Taking into account the higher maintenance cost of a used car, the price difference between a new and second-hand car has been shrinking.
This factor, in combination with the discounts offered by car manufacturers, has had a positive impact on new vehicle sales,” she said.
Private consumers power recovery
Across the Channel, the news is gloomy and 2013 has not started well.
In January, Germany’s new car market dropped 9% year-on-year.
In France it was down 15% and Italy 18%.
Yet in the UK new car sales rose by 11.5%, the 11th consecutive month of growth.
A slight decline in car buying by companies and fleet customers means it continues to be private consumers who are powering the recovery.
John Leech, head of automotive at KPMG, said car companies are targeting the comparatively buoyant UK, with larger-than-normal discounts to keep factories busy.
He said the growth also reflects a return to the new car market by customers who had switched to used cars during the recession.
He explained: “This may soon impact the UK’s used car market which has been booming and enjoying record high prices.
"Dealers and fleet managers need to take care that there may be a downwards price realignment in the used car market in 2013.
"I believe prices could potentially fall by as much as 5% over the next 12 months.”
Despite that, Leech believes the new UK car market will be flat in 2013, as improving consumer confidence is offset by a 2% real-world reduction in household incomes.
He also thinks the renaissance in UK car production will continue, up from the 1.5m vehicles in 2012 to 1.6m this year. “
JLR will report it is restricted from making more cars by its suppliers, who will in turn report that access to bank finance is their biggest issue,” he said.