UK Markets closed

UK car sales set to slide for a third consecutive year in 2019

Alanna Petroff
Senior Economics Correspondent at Yahoo Finance UK
Car sales in the UK are expected to slide in 2019 after falling for the last two consecutive years. Photo: Carl Court/Getty Images

The auto industry is bracing for a third consecutive year of weak car sales after back-to-back slumps in 2017 and 2018.

The Society of Motor Manufacturers & Traders (SMMT) reported Monday that manufacturers are preparing for an average 2% sales slide in 2019 after registering a 7% drop in 2018 and a 6% decline in the previous year.

If the prediction holds true, car sales this year would be about 12% below their 2016 peak when nearly 2.7 million new cars were registered in the UK.

However, the Brexit deadline on 29 March makes 2019 predictions unreliable, noted Mike Hawes, the CEO of SMMT.

The automakers are assuming “we will get through this, but it’s a bet,” he said during a press conference.

“The spread could be so huge between catastrophe … and a post-Brexit [sales] boost, you can only operate on what you see as, effectively, business as usual,” he said.

Automakers have been warning for years about the deeply damaging impact of Brexit and the risk that factories may be forced to stop production if the government fails to approve prime minister Theresa May’s Brexit deal.

“No deal is not an option,” Hawes said.

The UK car industry suffered a range of problems in 2018, including a Brexit-induced slump in consumer confidence, a roughly 30% drop in diesel car sales, along with a rocky transition to a new European emissions-testing system.

The new EU testing programme – called the Worldwide Harmonised Light Vehicle Test Procedure (or WLTP for short) – measures fuel consumption and emissions in independent labs that simulate real-world driving situations.

Bottlenecks in the testing system delayed the necessary certification for a range of car models, which contributed to a sharp drop in new car sales across the EU in the autumn.

Hawes called the new system a “once in a generation” change.

In mid-2018, Volkswagen Group’s (VOW3.DE) CEO Herbert Diess called the new testing system a “titanic task” and “the biggest [sales] volume and earnings risk” for his business.

Volkswagen Group produces some of the best-selling cars in the country, alongside Ford (F), BMW (BMW.DE) and Mercedes-Benz (DAI.DE).

Jaguar Land Rover, which is owned by India’s Tata Motors (TTM), is the largest manufacturer in the UK.