UK’s new car market to see another drop of 5% in 2020, not just because of Brexit, says GlobalData

Following the news that the UK new car market slipped back by 2.4% to 2.31 million units sold in 2019;

David Leggett, Automotive Editor at GlobalData, a leading data and analytics company, offers his view:

“The UK car market’s decline in 2019 reflects a number of negative factors that have come together to depress car demand. Besides the political and economic uncertainty in Britain surrounding Brexit, the uncertainty over future government policies and tax regimes surrounding diesel cars has also been a factor, demonstrated by the sharp decline in diesel car sales.

“Even the rise in share – albeit from a low base – of electric cars and hybrids unsettles some potential purchasers who are sensing that we are on the cusp of major technological change and are holding off on buying. These factors will still be at play in 2020, holding back the UK’s car market again. The UK’s new car market in 2020 is forecast by GlobalData to see another drop of around 5% to 2.2 million units.

“The UK’s planned formal departure from the EU at the end of January and the transition arrangements for UK-EU trade (effectively, business as usual) may have removed some short-term uncertainty, but the UK Government is aiming to conclude a new trade deal with the EU by the end of the year.

“It will be a very big challenge to get a comprehensive UK-EU trade deal in place for the end of the year. If it is not, a ‘no-deal’ on permanent trade arrangements between the UK and EU is a scenario that could see new import tariffs on car parts and finished vehicles as well as disruption to cross-border shipments (which means higher costs incurred by vehicle manufacturers). Once again, investment flows to UK Automotive could seize up and consumers will be nervous about economic prospects.

“In addition, currency volatilities also pose an ongoing concern, especially for importers who have seen margins eroded by sterling weakness. And the outlook for the UK economy is for another year of modest GDP growth – not much more than 1%. It’s hard to see the UK car market picking up against that background.”

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