April Sees Spring Shoots of Growth with Best Sales in a Decade
According to figures just released by the Society of Motor Manufacturers and Traders (SMMT), the UK car industry has just enjoyed its best April in ten years as dealerships up and down the country saw sales of new cars jump by 5.1% to just over 186,000.
The figures were welcome news for the industry, which had feared a downturn due to the general election. It is generally accepted that one of the main factors that drives growth is consumer confidence. Elections, by their very nature, are times of uncertainty, so there were industry fears that consumers would keep their wallets and purses in their pockets until they knew the outcome of the election. This, however, has proven not to be the case. Instead, dealers saw a sales increase of new cars of some 6.4% when compared with the same month last year.
These latest figures from the SMMT are just the latest instalment in a trend that has now continued for more than three years, with 38 months of consecutive growth. Economists believe that there are a number of reasons behind this continued growth. The first of these is the availability of cheap credit. We are still in the wake of the recent financial crisis, and interest rates are at historically low levels. This, in turn, has made borrowing cheaper than it has ever been, and financing major purchases like new cars has never been so affordable. These innovative financing packages are joined by high levels of consumer confidence. Despite what some politicians are saying, it seems that the great British motoring public is reasonably confident about the future and their own financial circumstances - enough so as to be comfortable with committing to major financial decisions such as buying a new car. This is borne out by an April survey which shows that the British consumer is more willing to spend his hard-earned cash than at any time since 2002. This trend is further reflected in the report that shoppers have spent more on the High Street in March than ever before, recording the best March sales ever seen. Even with those supporting facts, however, the strength in new car sales has surprised everyone, including the SMMT itself.
This has caused the SMMT to increase its forecast for car market growth in the UK from 1.2% to 3.6%. If this proves to be the case, then total new car sales for 2015 would be in the order of 2.56 million, which would be within touching distance of the all-time record of 2.58 million reached in 2003. According to SMMT chief executive Mike Hawes, the latest figures reflect the growing strength of consumer confidence, even when we are in the middle of a period of political uncertainty. According to Mr Hawes, in six out of the last nine general elections, there followed a period of marked growth in the sales of new cars.
The rising UK car sales paint a picture of a strong market that is in stark contrast with the situation being experienced in the rest of the EU. Here, most countries have experienced a long period of a decline in sales, right up until 2013. The picture, however, could now be changing finally across the EU. In April, all of the big EU markets showed varying degrees of growth. The largest market, Germany, saw a sales increase in new cars of 6%. In France, the sales increase was just 2%, while Italy recorded an extraordinary 25% increase. New car sales in Spain were up 3%.
There is some cause for concern, however, as some analysts say that the UK new car sales increases are being driven by deep discounting. These analysts question whether the dealers are actually making any money at all by selling cars at these prices and suggest that they are merely hoping to make money on repairs and servicing. They also say that UK growth is being driven primarily by strong fleet sales, which have seen increases of 9%, while the private car market has only increased by around 3%. Even so, with such steep discounts available it could be an ideal time to buy a new car.