Sales of electric vehicles fuelled the strongest start to the year for the UK car market since before the coronavirus pandemic, although the forecast for annual sales has been cut as increasingly cash-strapped consumers delay big-ticket purchases.
Almost 132,000 new cars were sold in the UK in January, up 14% year on year and a sixth consecutive month of growth. The figures mark the best start to the year since 149,279 new cars were sold in January 2020.
However, the Society of Motor Manufacturers and Traders (SMMT) has reduced its forecast of annual UK new car sales to 1.79m, a 0.8% reduction from its prediction in October, citing a weak economic outlook for this year.
Total new UK car sales this year are expected to be up by 11% compared with 2022 – which at 1.6m fell to the lowest level since 1992 – and a further recovery to 1.96m is expected for 2024.
The SMMT said the expected growth in UK car sales “bucks the national trend” as businesses and consumers cope with soaring inflation and a run of interest rate rises fuelling a cost of living crisis.
“The industry and market are in transition but [is] fragile due to a challenging economic outlook, rising living costs and consumer anxiety over new technology,” the SMMT chief executive, Mike Hawes, said.
The latest SMMT snapshot shows that electric vehicle sales continue to underpin overall growth.
Sales of hybrid vehicles rose by 40.6% year on year in January, with sales of battery models climbing by a fifth, accounting for 14.4% and 13.1% of all sales respectively.
Sales of petrol vehicles rose 14.6% year on year, accounting for 44.7% of all new cars sold in January, while diesel declined by 12%.
The 4.3% year on year drop in sales to private buyers shows the increasing economic pressure on household budgets.
“Welcome though it is, the surge in sales is partly a case of the market playing catch-up, as manufacturers work through the backlog of orders that were placed, but not fulfilled, last year as supply chain disruption held back the supply of new cars,” the director of AA Cars, Mark Oakley, said.
“Looking ahead, the key question for buyer demand will be the extent to which the rising cost of living impacts people’s willingness to commit to big-ticket purchases like a brand new car.”
Last month, the SMMT released data that showed total UK vehicle production slumped to a 66-year low in 2022, down almost 10% on 2021 and 40.5% compared with before the pandemic in 2019.