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‘Perfect storm’ sees November car sales blown off course, opinion

David Borland, EY UK and Ireland automotive leader

The perfect storm of challenges affecting the automotive industry continues unabated, with the pandemic, Brexit and supply issues all impacting consumer confidence and demand for new vehicles.

Against this backdrop and ‘Lockdown 2’ closing showrooms for the month of November, it comes as no surprise that new registrations suffered significantly, with a year-on-year reduction of 27.4%, leading to a year-to-date downturn of 30.7% or 663,000 units versus 2019.

On a positive note, this was less severe than declines in lockdown 1 as manufacturers and dealers were better prepared and able to fulfil orders through deliveries direct to consumers and click and collect models.

Playing the long game

With the recent announcements by the Government in its ‘Ten Point Plan for a Green Industrial Revolution’, which included the sales ban of ICE vehicles from 2030; closely followed by the 2020 Spending Review and the planned investment of £1.9bn across charging infrastructure and consumer incentives, it is clear that the longer term transformation is as important as the challenges the sector faces today.

The UK can be a long-term competitive player in automotive manufacturing if there is significant investment in battery development, production and the associated supply chain.

The investment confirmed in the Spending Review is a welcome first step in the right direction for both the UK automotive sector and consumers.

The consumer grants will reduce the impact of the higher purchase price of electric vehicles (EVs), and will be an important factor in the shift to zero emission vehicles.

Investment in the energy sector and charging infrastructure is also a critical step forward, alleviating the concerns of many potential EV buyers around: access to charging at home, duration of charge times, and anxiety over sufficient battery range.

But given recent estimates of the number of charging points needed across the UK to support mainstream EV adoption by consumers, further investment may still be needed to support successful roll-out and adoption.

It’s not all about the UK – mainland Europe sales also remain challenging

With different forms of lockdowns in place in the other European top five markets, similar declines have been seen, with significant reductions in passenger car sales reported in France (down 27%) and Spain (down 19%), Italy suffered its lowest growth for four months (down 8%) and Germany fared better with a similar outcome to October (down 3%). 

What next?

With the end of the Brexit transition period on December 31 and still no clarity on the outcome, there are reports of businesses stockpiling, concerns about blockages at ports, constrained supply routes from Asia, and manufacturers lining up cargo planes to overcome disruption at the borders.

Regardless of a UK-EU deal, change for all businesses will be inevitable, and particularly for the those in the auto sector who rely on complex, cross border supply chains.

But regardless of the hurdles that Brexit might bring, January is still likely to be another challenging month, with a focus of running day to day operations effectively and keeping the wheels of the automotive sector turning.

And all this has to be navigated while still keeping one eye on the longer-term transformation plans and the associated challenges that this presents.

2020 continues to be a year like no other.

Author: David Borland, EY UK and Ireland automotive leader

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