Companies are putting company car replacement on hold

Published: 15 May 2018

New car registrations increased 10.4% last month – putting an end to 12 months of decline – but with fleet sales static there was a warning from Britain’s largest vehicle leasing company that some businesses were putting new orders on hold and some drivers were opting out of company cars.

Data from the Society of Motor Manufacturers (SMMT) showed that in April new car sales totalled 167,911. The increase from 152,076 in April 2017 was, said the organisation, due to a number of factors including: the timing of Easter, which meant two additional selling days last month, and March’s adverse weather, which pushed some deliveries into April.

However, the SMMT, said that most significant, were the Vehicle Excise Duty changes that came into force last April, causing a pull forward into March 2017 and a subsequent depressed April market.

Fleet volume increased 0.9% to 87,486 last month (April 2017: 86,686), but business sector sales were down 12.9% at 4,818 (April 2017: 5,529). Private segment demand increased 26.3% to 75,607 (April 2017: 59,861).

Demand for petrol cars grew in April, up 38.5%, while diesel registrations continued the recent trend, declining 24.9%. Meanwhile, registrations of plug-in and hybrid electric cars continued to rise, up 49.3%, thanks to manufacturer investment in a growing choice of models, according to the SMMT. While it called the growth “welcome”, alternatively fuelled vehicles still accounted for just 5.6% of the market last month, 9,365 units.

Despite the significant rise in registrations last month, the overall new car market remains down year to date, with new registrations in the first four months falling 8.8%, year on year, to 886,400 units (2017: 972,092).

Fleet demand is down 8.5% at 444,147 (2017: 485,509), business sector volume is down 17.2% at 33,355 (April 2017: 40,274) and private registrations are down 8.4% at 408,898 (2017: 446,309). Overall diesel demand is down 31.9% in the first four months of 2018, while registrations of alternatively fuelled vehicles are up 5.2% at 46,058 (2017: 39,679).

The SMMT said while that level of decline was expected to slow over the course of 2018, political and economic uncertainty would continue to affect the market and further instability could cause additional disruption.

Chief executive Mike Hawes added: “It’s important not to look at one month in isolation and, given the major disruption to last April’s market caused by sweeping Vehicle Excise Duty changes, this increase is not unexpected.

“While the continuing growth in demand for plug-in and hybrid cars is positive news, the market share of these vehicles remains low and will do little to offset damaging declines elsewhere. Consumers need certainty about future policies towards different fuel types, including diesel, and a compelling package of incentives to deliver long-term confidence in the newest technologies.”

Ashley Barnett, head of consultancy at Lex Autolease, the UK’s largest vehicle leasing and fleet management company, said: “It’s unsurprising to see new car registrations for April rebound year-on-year, given the Vehicle Excise Duty changes in 2017 which saw more deliveries brought forward to March.

“Looking at the year-to-date figures however, the market is down – but this is not necessarily the best indicator of how the new vehicle market is performing.

“The average replacement cycle for most UK company car fleets is four years. If we compare Q1 2018 with the same period in 2014 and 2010, there is in fact a slight increase over time (17% between 2010 and 2018 and 4% increase between 2014 and 2018).

“Of more concern is that in order to meet government targets around emissions, we do need to see a more marked increase in registrations, so that older, more polluting vehicles are replaced with new, cleaner technologies.

“The Budget is now not taking place until the autumn which means the industry does not yet know the benefit-in-kind tax rates for what will be the fourth year of many fleets’ four-year replacement cycle. The lack of this key information makes it harder for fleets and drivers to plan for the future.

“As a result many consumers and fleets are holding off from placing orders. In some instances, drivers are opting out of new company cars to take older, less environmentally friendly vehicles.”