September, usually an important selling month in the automotive industry, saw a 20% drop in new car sales compared with the same time last year. The drop in sales is attributed in part to car makers’ struggle “adjusting to stricter emissions standards”.
The Society of Motor Manufacturers and Traders (SMMT) has explained that it was an “exceptional September following an unusually high August and a turbulent first eight months of the year”.
According to the SMMT both private and business sales fell, with only 338,834 vehicles being registered during the month. Noticeably, while petrol and diesel car sales fell, hybrid and plug-in electric car sales rose by 3.9%. The drop of 42.5% in diesel car sales could be due to drivers choosing energy efficient vehicles because of changes to the car tax. The government is trying to phase out the use of diesel cars altogether.
As of 1 September, new cars sold within the EU must undergo the Worldwide Harmonised Light Vehicle Test Procedure. This new test has “replaced all existing tests of emissions and fuel economy”, causing great difficulties for car manufacturers. In the knowledge that the test would be coming into effect in September, certain manufacturers decided to “incentivise sales in August, pulling forward demand”. This accounts for the 23% rise in August and the exceptional plummet in September. Moreover, certain carmakers were “unable to recertify all of their models in time” creating a backlog and “disrupting sales”.
Despite the drop in September, Mike Hawes, SMMT chief executive, has assured that: “The good news is that, as backlogs ease, consumers and businesses can look forward to a raft of exciting high-tech cars and a market keen to recover lost momentum”.
The current lack of clarity over Brexit has left car manufacturers concerned about how the trade relationship between the UK and the EU is likely to change. Both Nissan and Toyota, have warned that a no-deal Brexit could harm the car industry.
Nissan, the largest manufacturer in the UK, has said that “frictionless trade as part of the EU single market has enabled” the growth of its Sunderland plant, making it “the biggest factory in the history of the UK car industry, exporting more than half of its production to the EU”. The company urges “UK and EU negotiators to work collaboratively towards an orderly balanced Brexit that will continue to encourage mutually beneficial trade”.
Nissan has previously been quiet about Brexit. The company’s new willingness to warn against the implications of a no-deal Brexit indicates intensifying anxiety and concern of business executives.
A government spokesperson assures that the government remains “determined to ensure that the UK continues to be one of the most competitive locations in the world for automotive and other advanced manufacturing”. However, this was followed by the statement that the government is also preparing for the outcome of a no-deal Brexit. If no satisfactory deal is reached car manufacturing could be halted, with Honda reporting that “it is identifying components it might stockpile”.
It is clear that a no-deal Brexit has worrisome implications for the motor industry, and Koji Tsuruoka, Japan’s ambassador to Britain, has warned that companies would be forced to leave the UK if operating within the country becomes unprofitable.