New car sales hit 2.69m record in 2016 – but it’s not going to continue

Time 12:02 am, January 5, 2017

RECORD new car sales of 2.69 million – the fifth consecutive year of growth – were announced this morning by the SMMT.

The market has experienced uplifts in 10 out of the past 12 months, albeit finishing with a December down slightly by 1.1 per cent – with 178,022 new cars registered in the month.

Buyers were attracted by a range of new car models and attractive finance deals, pushing registrations up to 2,692,786 in 2016 – up 2.3 per cent on the previous year and broadly in line with expectations.

The UK new car market is one of the most diverse in the world, with some 44 brands offering nearly 400 different model types.

Fleets were responsible for most of the growth, with demand growing to a record 1.38 million units. The private market remains at a historically high level, with more than 1.2 million private buyers registering a new car in 2016, although demand did fall over the latter three quarters.

The competitive range of affordable finance is a crucial factor driving private demand as consumers are able to take advantage of low interest rates and flexible payment options.

Strong uplift

Diesel and petrol cars continued to be by far the most popular fuel types for consumers, with market share at 47.7 per cent and 49.0 per cent respectively. However, alternatively fuelled vehicles (AFVs) experienced a strong uplift in demand, up 22.2 per cent across the year.

Plug-in hybrids and petrol electric hybrids, in particular, experienced significant growth, with demand up 41.9 per cent and 25.1 per cent respectively. Meanwhile, more than 10,000 motorists chose to go fully electric in 2016 – up 3.3 per cent on 2015.

At a special event in London yesterday, SMMT chief executive Mike Hawes, pictured, briefed journalists ahead of the official release saying strong consumer confidence, affordable vehicles and competitive finance packages had pushed sales to a record high.

However, he warned that growth would not continue in 2017 – predicting instead that sales would fall between five and six per cent this year, echoing those views of manufacturers and dealers who spoke at Car Dealer’s Automotive Influencers event in December.

Hawes said: ‘Last year was an interesting one and undoubtedly a challenge, but 2.7m is an all-time record and beats the previous record set in 2015. That’s about a 2.2 per cent increase over the preceding year.

‘Invariably, what is driving those new car sales is fundamentally consumer confidence is very strong, despite the events of the last year.’

Superminis were the most popular models (however that segment was still down around eight per cent), closely followed by minis. Luxury cars were up significantly, as were crossovers.

Hawes said that the increasing popularity in PCP and PCH finance packages drove this as buyers looked at the monthly payment figures, rather than the cost overall.

‘Buyers are purchasing more on finance now and have moved away from ownership and are instead looking more towards usage and the flexibility to easily change for something new,’ he explained.

However, the SMMT is clear that the record highs will end this year.

Hawes said: ‘We foresee the market being down by between five and six per cent at 2.54m to 2.55m car sales in 2017.

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‘We’re not talking about a collapse in the market by any means. We are at unprecedented high levels. There was latent demand for four or five very, very tough years during the recession. But we have to recognise that growth can’t be inexorable, so there is undoubtedly a levelling off.’

MORE: SMMT boss Mike Hawes’ media briefing in full

MORE: Scrappage scheme not needed to bolster sales – just yet

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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