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Taking Stock: the State of the United Kingdom’s Automotive Industry


10th Aug 2020 Down to Business

Taking Stock: the State of the United Kingdom’s Automotive Industry

There aren’t many facets of life that have not been upended, rearranged, or just plain old eliminated thanks to the coronavirus pandemic. One of the industries that’s been hardest hit, however, is the automobile market.

That’s due in part to the fact that we are driving much less than we were before "social distancing” and “shelter in place” were household terms. Fully 49% of the United Kingdom’s residents reported working from home in June, and while many employers are beginning to end temporary furloughs, still others are making an official switch to homeworking. 

Additionally, worldwide economic instability has led to consumers snapping shut their pocketbooks, or at the very least, giving big-ticket purchases like vehicles a lot more thought before signing on the dotted line.

The pressures imposed by societal shifts in the wake of COVID-19 aren’t the only reason that the auto industry is in such shambles, however. In August 2019, the uncertainty surrounding Brexit, global trade tensions, and scandals over emissions here at home created the proverbial perfect storm, leading to the worst decline in new car production since 2001.

Let’s take a closer look at how the auto industry is faring, and what the future may hold.

The Overall State of the U.K. Auto Market

New car sales have been dismal for several months now. As showrooms shuttered their doors just as spring was starting, the number of automobile purchases dropped precipitately.

In the U.K. as a whole, there were some 44% fewer cars sold than in March 2019. Figures in Scotland were even more dire, with the number nearly halved from last year.

Of course, March may not be the best month for taking the temperature of this sector, as it’s one of the two months in which new number plates are issued. That makes it a busier time than say, February or April. Given the fluctuations – of both coronavirus cases and consumer spending figures – that have characterized summer 2020, it will be interesting to see what the numbers are like come September.

As it stands, however, the automotive industry remains as instable and unpredictable as any other bellwether concerning the state of the nation.

Diesel Is Down; Hybrids Are Showing Promise

As diesel vehicles continue to lose popularity with Brits, cars that rely on alternative fuels are the rare bright spot in an otherwise gloomy landscape. Plug-in and plug-in hybrid cars were the only auto categories that improved year-over-year, with plug-in electric models now accounting for nearly one out of every 20 new cars in March.

If and when the European automotive market begins to recover, say industry analysts, we may well see an overarching shift to more environmentally friendly cars. Or, depending on how employment figures shake out over the next few quarters, the industry could also go in a completely different direction, with more drivers eschewing the new and green in favor of the old and affordable.

What About the Used Car Market?

It’s a truism that brand-new passenger vehicles start to depreciate the moment they’re driven off the forecourt. But are their “previously enjoyed” counterparts a commodity that will prove recession-proof – or pandemic-proof?

From this vantage point, it’s really anyone’s guess. The fact of the matter is that used-car dealerships are hemorrhaging money right now, with inventory that they can’t move. There are also supply-chain issues, given that so many automotive parts are manufactured in China, where COVID-19 took its first, and one of its worst, tolls.

Demand is down, and will likely remain so as more companies pivot to telecommuting policies. Prices may plummet as well, if dealers decide to slash payment amounts in the name of offloading stock. And continued low interest rates on auto loans as well as mortgage loans could sweeten the deal for those who do have discretionary income and want to make the most of this unusual fiscal environment.

The economic insecurity could also result in Brits tightening up their purse strings and finding alternate solutions to their transportation needs, such as opting for broader insurance and extended warranties rather than splashing out on new wheels (more on that here:  https://gogetolive.com/extended-car-warranty/audi/)

Only Time Will Tell

As with just about every other aspect of life in the here and now, the U.K. auto market’s future is uncertain. Many economics experts and even everyday folk would argue that even its present is uncertain. Of course, only time will tell what the lasting impact of the pandemic, Brexit, and global financial markets on this sector will eventually be written for history.

Are you scaling back or even shelving big-ticket purchases? How have your spending habits changed in the last several months? How do you think Brexit will impact the financial markets? Have your say in the comment section below!

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