News & Analysis

No disposable income? Who's buying all these cars?

Andrew Saks, Friday, 4 June 2021

For those who thought that the British public were going on a new car buying extravaganza last month when the figures relating to new car registrations were up by 453%, that's nothing!

The Society of Motor Manufacturers and Traders (SMMT) says that the Volkswagen Golf has been the bestselling car model in May 2021, but I suppose there is no accounting for taste...

When looking at a Year on Year set of data, new cars registered in May this year had increased by an astonishing 674% compared to May 2020, which was just two months after the wheels came off the economy due to lockdowns.

Although the sales of new cars remain 183,742 below those of May 2019, it is still an incredible increase over May last year.

For those who (like me) are car enthusiasts, this is a fun figure, however for those who use such metrics as a reference point for more spreadsheet-orientated study and as a measure of spending on large, expensive items in correlation to the economic well-being of the country, it is an indicator that a lot of people have the income to lease, or spare cash to buy a new car.

156,737 new cars cruised out onto British roads in May this year, and rather interestingly, 13.8% were plug-in hybrids (PHEV), those being cars with an internal combustion engine as well as an electric motor in which the electric motor can operate independently, and the car's battery can be charged via electric car charging points as per a fully electric vehicle.

This demonstrates that an increasing number of people are prepared to pay the considerable amount of extra money to buy or lease a plug-in hybrid over the standard internal combustion-only models in the same range, once again showing that the British public not only has the future in mind but is willing to pay for it.

Mike Hawes, CEO of the SMMT this morning said "With dealerships back open and a brighter, sunnier, economic outlook, May’s registrations are as good as could reasonably be expected. Increased business confidence is driving the recovery, something that needs to be maintained and translated in private consumer demand as the economy emerges from pandemic support measures."

"Demand for electrified vehicles is helping encourage people into showrooms, but for these technologies to surpass their fossil-fuelled equivalents, a long-term strategy for market transition and infrastructure investment is required" concluded Mr Hawes.

That may be the case in many rural areas, however here in London, there are electric car charging networks abound, and arrays of charging points in almost every neighborhood, every underground parking lot for residential buildings and outside every supermarket. That has happened very quickly, so the start-ups that operate them clearly see the increasing number of electric vehicles and plug-in hybrids on the road as an opportunity just as market analysts see it as a measure of high levels of disposable income.

It is possible to guess what these figures consist of. Is it genuinely a high level of disposable income, or is it a struggling motor industry that has come up with cheap all-inclusive leasing deals and subscription models that reduce the entry barriers to driving a new car? If it’s the latter, hats off to the automotive industry for reinventing itself!

Richard Peberdy, automotive lead at KPMG UK today told mainstream British media "Despite some caution, there are signs that sales are ripe for recovery in the longer term. The average age of vehicles on our roads is at a record high, suggesting many drivers will be looking to switch soon, and inventory shortages in the used-vehicle market should push motorists towards new models."

New car registration figures are used by economists globally as a yardstick relating to economic buoyancy among the public, largely because, like it or not, enthusiast or not, almost everyone when they get a spare bit of cash rewards themselves with a new car.

The British Pound is high against the Euro again today, given that many of these new cars on British roads are imported from Europe, this may well be a contributing factor.

It's a status symbol as much as it is a mode of transport. In nations where it is not a status symbol and for many is unattainable and expensive, car license plates are generic and often made up of a series of letters and serial numbers, however in the curtain-twitching United Kingdom, the year of registration has been displayed since 1963 - I wonder why that is......

 

 

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