Although conventionally known within the motor industry as the calm before the storm, due to the introduction of new registration plates in September, August saw would-be motorists splurging on new cars, seeing sales growth continue to burgeon for a 30th successive month.
According to data from the Society of Motor Manufacturers and Traders (SMMT), August saw the registration of 72163 new vehicles, marking a 9.4% rise over the previous 12 months. With the abundance of automobile savings deals combined with the culture of frugality is embedded within Britainís motorists, it appears that certain discounts were too enticing to hold out for.
Mike Hawes, SMMT chief executive, said: ìNew car registrations reached two-and-half years of consecutive monthly growth in August, as confident private and fleet consumers continued to snap up enticing deals on a wealth of advanced new products.
Mr Hawes also lauded the UKís car industry by comparison to the rest of the EU, noting its growth has unswervingly outstripped its European counterparts for the past two years.
Although this yearís month of August has successfully bucked the trend, and exceeded its expected proportion, 3%, of cars sold in a calendar year, financial experts caution that people ought not to make wild inferences on the state of the wider economy. While Augustís car registration data indicates that the automobile industry is enjoying a healthy period, markets will always remain mercurial as evidenced by stagnating wage growth and the threat of a pending base rate hike. The dampening effect the aforementioned factors could have on the automobile industry could be significant.
Howard Archer, head UK economist at IHS Global Insight, reinforces this viewpoint with his measured assessment of the prospective challenges facing the automobile industry:
“The economic fundamentals still look largely positive for the motor industry which will hopefully fuel ongoing healthy car sales ñ although the growth rate is highly likely to ease back given double-digit growth both in 2013 and over the first eight months of 2014.
“One concern for car manufacturers is that extended low earnings growth could become a constraint for private car sales while some consumers will also be worried by the prospect that interest rates will start to rise before long:î He added
David Raistrick, UK automotive chief at Deloitte, outlined other trials facing the automobile industry whilst paying heed to the glaring economic issue of interest rates.
“Aside from a potential interest rate rise, the biggest challenge facing the automotive retail sector will be the impact of the increasing numbers of nearly new used vehicles returning to the market.
“This could detrimentally affect residual values with the knock-on effect that the used-vehicle purchase becomes a more competitive proposition ñ bringing an element of balance back to the industry.”
Wage growth fell for the first time last month by 0.2%, and has trailed behind inflation for almost 6 years now ñ a key factor in the BoEís decision to maintain the record low base rate. However, this monetary constriction has apparently not impacted on motoristsí aspirations regarding the purchase of new cars with data showing that 1.53m cars new cars have been acquired in 2014 marking a 10.1% upsurge on the previous year. With consumer confidence at a high at present due to reports of economic growth and falling unemployment, the SMMT have forecasted even greater levels of growth across the rest of 2014.
Continuing its retail success for 2014, the Ford Fiesta remained the most sought after car by consumers, yielding 4657 completed transactions in August. It was followed by the Ford Focus, Vauxhall Corsa, VW Golf with the Vauxhall Astra completing the list of the top 5 most purchased cars in August ñ an accurate reflection of the yearís biggest selling cars too.
With September typically accounting for 18% of yearly automobile sales, the short-term future of the automobile industry seems to be in fine fettle.