The cost of living and rising interest rates are stalling private new car sales, according to analysis by The Car Expert.
The latest data from the Society of Motor Manufacturers and Traders (SMMT) released today indicates that sales were up 28% in July compared to the same period last year.
However, all of that growth came from the fleet market which is still playing catch up after vehicle supply issues started to improve in recent months. Private sales were flat, with just a 0.3% increase in July over the same month last year.
While it is good news for businesses, the impressive fleet sales growth, in relative terms, is modest as the figures are still significantly below levels seen before the Covid-19 pandemic.
Despite a reluctance to fork out for a new car, there are now better deals available to consumers and supply issues are much improved compared to recent years. Several manufacturers, including Vauxhall, Skoda and BMW, are pushing 0% interest rate deals for new cars.
Stuart Masson, Editorial Director at The Car Expert, said: “The UK car industry is still in recovery mode rather than experiencing real growth. Last month’s results exemplify this perfectly as fleets continue to catch up some of the lost ground over the last few years, while consumers aren’t buying more cars despite some better deals available.
“Potential post-Covid growth is being curtailed by cost of living increases. It’s no surprise that as interest rates have shot up, genuine sales growth has been almost non-existent. Households have smaller budgets available to spend on a new car, and that amount of money now gets you a lesser car than it did a year ago.
“Things will start to improve but we are in a new reality for new car sales. We are unlikely to see a return to pre-pandemic levels in the foreseeable future – or possibly ever. Though in many ways a more sustainable, albeit slightly lower, market without constant oversupply is quite appealing.”
Diesel vehicles have reached new depths after sinking the bottom of the pile of powertrain options in July – the first time this has happened. Diesel vehicle market share in July was just 7.8% (including mild hybrid diesels), meaning that it was overtaken by plug-in hybrids.
Electric vehicle sales recorded a modest month, securing a 16% market share. While this is up on the 11% share EVs represented in July 2023, it is stubbornly close to the average market share for the year-to-date (16.1%) and still behind 2022’s full-year result of 16.6%. Much more work is needed to make the government’s 2030 deadline for ending the sale of new petrol and diesel cars.