new car sales

NI new car sales soar by 2,594% y/y but sales volumes remain well down

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Northern Ireland new car sales posted another freak year-on-year growth rate in May. There were 3,879 new cars sold locally last month. That represents a whopping 2,594% y/y increase on May 2020’s total (144) and compares with the 13,629% y/y rise recorded in the previous month. These jaw dropping growth rates are explained by the fact that comparisons are being made with last year’s lockdown lows.  For example, last April saw just  24 new cars sold. But these seemingly impressive growth rates, while welcome, compare unfavourably with pre-pandemic car sales volumes. 

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Treat mega growth rates with a mega pinch of salt

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May has already brought with it April showers and some weather warnings. The first week of May has brought in the first economic data for April and we should brace ourselves for some startling year-on-year growth rates for April and for Q2 in due course.  Two indicators worth watching concern residential property transactions and new car sales.  

Today’s SMMT new car sales for April confirmed that UK new car sales increased by 3,177% year-on-year last month.  But this growth rate paled into insignificance relative to the 13,629% year-on-year rise for the Northern Ireland new car market. Context is everything here.  The huge increase is a reflection of how bad April 2020 was rather than how strong activity is this year. This is what economists call ‘base effects’ in this case rebounding off an extremely low base. For example, there were just 24 cars sold last April during the first full month of lockdown. That represented a 99.4% y/y decline on the previous year. Despite a near 14,000% y/y in April 2021, last month’s sales of 3,295 new car sales were still disappointing. Local dealers sold 20% fewer new cars in April 2021 than they sold on average each April during the decade before COVID-19 struck. Indeed, last month’s car sales figures represent the second worst April on record. 

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Biggest drop in new car sales since WW2

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Biggest annual decline in peacetime – 2020 has been a year of record rates of decline on a number fronts, not least within the car industry. Brexit and lockdowns were two headwinds for the sector that dampened demand. New UK car sales slumped by 29% last year which represented the steepest annual fall since World War II (1943) with sales volumes plumbing their lowest level since 1992.  2020 marked the fourth consecutive year of declining car sales in the UK with a cumulative decline of 40% (1.1 million cars) since 2016’s peak. Electric vehicle sales have been one bright spot at the expense of petrol and diesel engine vehicles. Battery electric vehicles and plug-in hybrid electric vehicles saw sales soar by 186% and 91% respectively last year. As a result, electric vehicles now account for 1 in 10 of all new car sales, up from 1 in 30 in 2019.

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New car sales up and down in June?

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(up in Q2 y/y but down y/y in June)

New car sales are traditionally viewed as a key barometer of consumer confidence. Despite the labour market being the strongest it has ever been, consumer confidence – viewed through the lens of new car sales – remains uninspiring. Last month proved to be the weakest June for dealers in seven years with 5,170 new vehicles rolling out of showrooms. That was six per cent lower than last year. However, the latest figures follow the best May in 11 years and a mediocre April.  As a result, the second quarter still posted a respectable 2.7% y/y rise (+369 cars) and the strongest Q2 in three years.

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Consumer confidence still lacking in car market

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Northern Ireland recruitment agencies may be capitalising on strong demand within a buoyant labour market, but , conversely, local car dealers continue to experience tough trading conditions with consumer demand for a new set of wheels remaining lacklustre. August saw some improvement, albeit marginal, with new car sales 1.5% higher than the same period last year. There were 3,701 new cars sold last month, some 54 higher than last August’s figure.  However, the latter represented a five-year low so the latest improvement must be set within that context.

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New car sales stuck in reverse

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New car dealers in England, Scotland, Wales and Northern Ireland all posted hefty double-digit year-on-year declines in March.  These ranged from 15% for England to 21% for Scotland with Northern Ireland coming in with an annual decrease of almost 17%. Last month was the quietest March for NI new car dealers in five years. This wasn’t due to the Beast from the East dissuading would-be car buyers from venturing out to dealers’ forecourts. Instead the steep falls are largely due to the inflated sales figures in March 2017.  Back then Northern Ireland car sales increased by 10% y/y.  However, this was distorted by a change in Vehicle Excise Duty in April 2017, which incentivised consumers to bring forward their plans to buy a new car.

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No surprise that new car sales are falling

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Northern Ireland retailers have benefited from the tourism boom and a surge in cross-border shoppers.  With the latter boosted by the post-EU referendum depreciation in sterling. This provides a veneer of consumer strength driven by visitors. However, the underlying picture is somewhat weaker.

New car sales are a key barometer of consumer confidence and provide a more meaningful indicator of the health of the consumer. Inflation has been outpacing wage growth and this is sapping household disposable incomes. A significant range of welfare benefits are also in the midst of a multi-year freeze. Against this background it is perhaps not surprising that the biggest discretionary spending item after housing, new car sales, are falling.

Showrooms reported their worst October for sales of new cars in five years, with registrations for the first 10months of the year down over 5% y/y.

2017 looks set to see the biggest annual decline since 2011. Local new car sales are over 20% below their peak in 2007.

This compares with the UK where new car sales, though falling, are still 8% above their pre-recession high. 2018 is also expected to be a challenging year for the local consumer with the cost of living squeeze set to tighten its grip.