UK Car Sales in 2014 Were Best for a Decade
The results are in and they are pretty much as expected: sales of cars in the UK during 2014 reached levels not seen since 2004, well before the industry was hit by the financial crisis.
The results also mean that the industry begins 2015 on a welcome high and on the back of a record sequence of 34 months of consecutive sales growth. The figures were released by the Society of Motor Manufacturers and Traders (SMMT). They show that sales of new cars in the UK rose by 10% in 2014 to 2.48 million vehicles. This also beat the 2.44 million figure of 2005 but fell just short of setting a new record, which was set back in 2003 with sales of 2.6 million.
SMMT Chief Executive Mike Hawes points to the continued availability of attractive finance packages and growing consumer confidence as the reasons behind the long period of sales growth in the industry. Continued low interest rates have had a dramatic effect on the industry, making cars more affordable through low-cost loans and other finance packages. The result is that more than 75% of new car purchases now involve some kind of finance. Some motorists are also plumping for personal contract purchases, where the motorist pays for the depreciation of the car over a fixed period but does not actually own the car.
Drivers are also being attracted in the advances in technology being seen in some cars. These include connectivity and smart navigation systems, along with driving aids such as parking sensors and even self-parking cars. Crucially, impressive advances have also been made in fuel efficiency, and many cars are returning mpg figures that could only be dreamed about just a few years ago. This means that buying and running a new car can suddenly make good economic sense as well as just providing a shiny new model to sit on the driveway. In some cases, switching to a new car can actually be cheaper than running an older model.
The UK car industry seems to have benefited generally from the recovering economy, and this has released a pent-up demand for new cars. During the financial crisis, many people put off making major purchases such as buying cars and chose to keep their vehicles for longer. As the situation has improved, many of these motorists are coming back to the market and trading in these older cars for a new model. Some analysts are also pointing to the payouts from mis-selling payment protection insurance as being a factor. These payments have been widespread and the average payout is around £3,000. Clearly, this is just about ideal as a new car deposit, so it may have fuelled new car sales.
The question now, of course, is just how long this boom in car sales can last. Some industry observers are reporting that the major manufacturers are already seeing demand soften. Privately, they are saying that the market is starting to fall away as all that pent-up demand is finally released. Some are therefore saying that the industry may already have reached a plateau and that there will be a significant reduction in the rate of growth from early in 2015. The SMMT itself has said that it expects sales in 2015 to be stable.
Such a market slowdown in the UK, however, need not mean a reduction in production for the UK's car makers. Many premium brands, such as Jaguar Land Rover, are continuing to see increased demand from overseas markets. Indeed, some 80% of UK car production is now exported. Traditional export markets such as the EU and US have been flat, but there has been a significant uplift in sales to the emerging economies of Russia and China. Indeed, some manufacturers are now beginning to sign joint venture agreements and build factories in these countries in order to avoid hefty import taxes and boost their sales even further.