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The SMMT 2015 new car market data posted increases in all but one of the past 46 months and showed the biggest ever December market with 180,077 new cars registered an increase of 8.4% in the month. Overall, the market rose 6.3% in 2015 to 2,633,503 units, exceeding forecasted numbers and outperforming the last highest recorded year, 2003, when 2,579,050 new cars left UK showrooms. This is only the fourth time that the market has surpassed 2.5 million vehicles in a full year.
Growth was enjoyed across all sectors, with UK fleets boosting demand by 11.8% to reach an all-time high of 1.3 million units. Appetite in the private sector was also robust, up 2.5%. Buyers took advantage of attractive finance deals and low inflation to secure some of the most innovative, high tech and fuel efficient vehicles.
Fleet –v- Retail
In the months leading up to November, fleet buyers registrations rose considerably, an increase of 8.7% ahead of those to private customers which managed to increase by 2%, this continued a trend that has been evident for several months in 2015. Meanwhile the appetite in the private sector was also robust, up 2.5 % for the year 2015. (SMMT)
In the months leading up to November, the demand for both petrol and diesel models remained relatively healthy with increases of 3.8% and 3.6% respectively, while the popularity of alternatively fuelled vehicles continued to grow with an 8.6% uplift.
AFV demand grew an astonishing 40.3% securing the biggest ever market share of 2.8% for the year as more consumers continue to switch to an ever more diverse range of ultra-low emission vehicles (ULEV’s).
Plug-in hybrids also experienced large growth, with volumes more than doubling. Pure electric vehicles saw an uplift of around 50% at the end of 2015. It will be interesting to see how the market performs for AFV’s in the coming months, as manufactures increase investment and growing numbers of consumers become more aware of the benefits of AFV’s from new developments in technology (SMMT).
European car market
In November 2015, the EU passenger car market recorded a very strong increase of 13.7%, marking the 27th consecutive month of growth and totalling 1,085,259 units sold. Over those 11 months, car registrations increased by 8.7%, reaching 12,603,855 units. Likewise, December saw the biggest car sales gain in 28 months after experiencing a growth rate of 15.2%. Even though December was the fastest growing month, the market is still trailing pre-crisis 2007 levels by almost 11%. All major passenger car markets rose strongly during the month, significantly contributing to the positive outcome of the EU car market. Spain 25.4%, Italy 23.5% and France 11.3% posted double-digit percentage gains, closely followed by Germany with a market increase of 8.9%, which also performed better than in November 2014. The UK market recovered in November by 3.8% as well, after showing an initial decline of 1% in October.
In 2015, EU passenger car sales grew by 9.3% bringing the total number of cars sold to 13.7 million units, compared with the pre-recession level of 15.5 million cars in 2007. 2016 is expected to see more modest sales increase for both passenger cars and commercial vehicles, forecast to rise by around 2%, reaching roughly 14 million units. These figures were highlighted by ACEA President, Dieter Zetsche, who stated that the picture is similar for production numbers, with EU passenger car output up 6.2% in 2015 compared to 2014. In total, around 15.9 million cars were produced last year, still down from almost 17 million in 2007. (ACEA)
Wider Economic Outlook
Annual GDP growth in the EU accelerated to 1.7% in 2015 and is expected to increase to 2.4% in 2016. Growth specifically in the euro area increased by 1.3% at the end of 2015 and is expected to rise to 1.9% in 2016. Consumer spending and business investment will be the main drivers of UK growth throughout 2016 and 2017. This is due to the sharp fall in energy prices which is expected to lower headline inflation over the coming quarters, altering inflation in the EU and the euro area to just 0.2% and -0.1% respectively in 2016. Price levels are however, expected to bounce back in 2017 by 1.4% in the EU (PricewaterhouseCoopers).
UK consumer spending has grown by around 2.5% per annum in real terms in the past three years. The major driving forces of this have been rapid job growth, with the UK reaching near full employment and a decline in individuals saving habits. House prices are now also increasing alongside growing consumer confidence and more readily accessible finance.
Inflation in the UK has been close to zero in 2015 but seems likely to increase to 0.75% by the end of 2016. Inflation is expected to start to rise from August although; this is not entirely certain and has potential for change. The current forecast is based on the assumption that economic growth will be reasonable over the first half of 2016; earnings growth will see a renewed pick-up amid the growing labour market and consumer price inflation trends. (Mark Carney, Bank of England). In the long term, it is expected that official rates will rise gradually to more normal levels of around 3-3.5% by 2020.
The share of UK exports going to China, India and the next five largest emerging markets should continue to rise gradually from around 9% to 13% in 2030. Services have also become increasingly important for UK trade. It is anticipated that the total value of UK services exports to exceed that of manufactured goods exports by 2020. This will help to keep the share of UK exports going to the US, which is the UK’s largest trading partner for services, broadly stable at around 17-18% over the period to 2030.
Although much discussion has centred on the importance of the emerging markets and the potential opportunities they will bring for UK trade, existing relations should not yet be dismissed. The UK still exports more to Ireland, than to China and Hong Kong combined, exemplifying the growth opportunity in the exportation market to Asia. In the future, it is expected that this will change, however this will be a slow process and should be managed so as not to damage existing relations. It is also important to note that, as recent developments show, exports to emerging markets also tend to be more volatile and susceptible to external and domestic shocks. It is important that the UK also continues to focus on its established trading partners in the EU and the US.
UK growth slowed somewhat during the first three quarters of 2015. This was caused by sluggish growth in Europe and uncertainties related to economic problems in Greece (first/second quarter of 2015). This was also added to by risks associated with China and other emerging markets that had an impact on growth later in the year. In contrast, UK domestic demand growth has remained relatively strong in 2015, driven by rising employment, the recent pick-up in earnings growth and the benefits of lower global oil prices for UK consumers (and many businesses). UK growth continues to be driven primarily by services, with manufacturing growth having slowed since last year and construction trends being erratic. However, the automotive industry has seen car production accelerate to a 10 year high in 2015, growing almost 4% with 1.6million cars built and almost 80% of those shipped abroad. However, due to the current economic problems Russia and China are facing currently, their export numbers reduced by 69% and 40% respectively.