With over half a million EVs on UK roads, it’s clear that electric cars have made an impact on British drivers. But is it enough to pull the UK car market out of a sales slump?
Whilst the year has started well for the British car industry, forecasts suggest it’s unlikely to last all year through. So, what are the issues holding car sales back? And why is the popularity of electric cars booming? Let’s take a look…
EV sales rise despite sales forecast
This year, the UK car market experienced the best new year’s start since the coronavirus pandemic began. In January, 132,000 new cars were sold in the UK. This marked the sixth month of growth in car sales and showed a 14% year-on-year increase. This growth is largely thanks to electric vehicles – with sales of hybrid models rising by 40.6% year on year. But does this signal a long-term return to form for the UK car industry?
Unfortunately, the answer is not clear cut. Despite the positive start, the Society of Motor Manufacturers and Traders (SMMT) has reduced its annual new car sales forecast for the UK down to 1.79m. This is a reduction of 0.8% from their original October forecast. Why? The SMMT cites the cost-of-living crisis as a factor. As consumers manage tightened budgets, they’re less likely to make big purchases – like a brand-new car.
However, it’s not all bad news. The total number of new UK car sales is expected to rise by 11% in comparison to 2022. Meanwhile, market recovery is further predicted to reach 1.96m in 2024.
Plus, in terms of 2022’s new car sales, hybrid vehicle sales made up 14.4% of all car sales, whilst battery models accounted for 13.1%. 44.7% of new cars sold in January were petrol vehicles. All three vehicle types showed a year-on-year increase in sales.
As SMMT chief executive, Mike Hawes, states, “The industry and market are in transition but [they’re] fragile due to a challenging economic outlook, rising living costs and consumer anxiety over new technology.”
So, whilst the industry is in recovery from the setbacks associated with the coronavirus pandemic and repeated lockdowns, there are still plenty of challenges up ahead.
Why are electric vehicle sales increasing?
Electric vehicle sales soared to record highs in 2022 despite supply chain complications. Unfortunately, last year also saw new car sales plummet to the lowest amount in thirty years. Still, electric vehicles continued to rise, reaching their largest share of the market in December, comprising almost 1/3 of all new car sales within the month.
In another record, sales of electric cars surpassed new diesel cars for the first time, with nearly 17% of all yearly sales. As well as being the top-selling electric vehicle of 2022, Tesla’s Model Y also reached third place on the UK’s top-sellers list.
So, what are the reasons behind the spike in electric vehicle sales? There are several key factors to consider…
Environmental impact
With concerns about global warming rising, one of the most popular reasons for switching to an electric car is its reduced environmental impact. Electric cars don’t release the harmful emissions connected with climate change, so they can help to reduce your carbon footprint.
Running costs
Petrol and diesel can be incredibly costly for UK drivers. In comparison, charging an electric car from home can often be considerably more affordable.
2030 petrol and diesel car ban
With the sale of new petrol and diesel cars set to be banned within the UK by 2030, it’s perhaps natural that some consumers are looking to get ahead of the curve.
On the other hand…
That’s not to say there aren’t still limitations to electric vehicles. Whilst electric car sales seem set to rise, the limited availability of public chargers could put some consumers off from switching to electric.
What are the challenges facing the UK car market?
Whilst electric car sales have continued to reach new highs, the wider UK new car market has met with continued roadblocks. So, what has led to the reduction in sales?
Supply shortages
A major issue affecting the UK new car market is the semiconductor shortage. These chips are used for a variety of purposes in the car industry, including in-car entertainment systems. Due to the shortage caused by the COVID-19 pandemic, along with other supply chain issues, manufacturer waiting lists grew longer for certain models. This meant that it took over a year for some consumers to receive their new cars.
However, many of these industry shortages are starting to improve, suggesting that car sales may receive a boost over the next year.
Cost of living crisis
Along with industry-related complications, instability in the wider economy is also taking its toll. With rising interest rates and increased energy costs, among other expenses, British consumers are tightening their belts and their budgets in response.
As household funds are filtered towards everyday expenses, fewer car drivers will be looking to make an upgrade to the latest tech. Those in need of a new vehicle may look towards the second-hard market, which will also contribute to a dip in new car sales. In a WhatCar? survey of 1,232 consumers, 36.6% pushed back their car purchases due to the crisis. Meanwhile, among consumers who intended to purchase a used car, 20.6% had originally intended to buy a new car, but switched due to the cost-of-living crisis.
Leasing an electric vehicle
Electric vehicles continue to boom within the new car market, offering great benefits to drivers and the environment. If you’d like a vehicle with no exhaust emissions, cheaper running costs and reduced maintenance, then an electric vehicle might just be your ideal car. Whether you’re looking for electric car leasing or hybrid leasing deals, you’ll find exactly what you’re looking for with Leasing Options.
Still not sure if electric vehicles are right for you? Contact our friendly, professional team for advice on finding the perfect leasing deal for your needs. Or, if you’d like to stay up to date with EV technology, head to our blog for the latest news and reviews.
