SMMT: EV bolster January growth but shortages hinder recovery

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Despite reporting the fourth consecutive month of growth, the UK automotive recovery is threatened by increasing costs.
Despite reporting the fourth consecutive month of growth, the UK automotive recovery is threatened by increasing costs.

The UK automotive sector has recorded a positive start to the year, with 115,087 new cars registered – 27.5 per cent up on 2021 levels.

According to Society of Motor Manufacturers and Traders (SMMT) figures, January’s growth was driven mainly by electric vehicles (EV), with battery electric, plug-in hybrid and hybrid cars account for 71.5 per cent of registrations’ uplift. Both plug-ins and battery electric took this month a 20.4 per cent piece of the market, with registrations going up to 9,047 and 14,433 respectively.

“Given the lockdown-impacted January 2021, this month’s figures were always going to be an improvement but it is still reassuring to see a strengthening market,” commented SMMT’s chief executive Mike Hawes. “Once again it is electrified vehicles that are driving the growth, despite the ongoing headwinds of chip shortages, rising inflation and the cost-of-living squeeze.”

Despite the bolster provided by EVs, Britain’s automotive output is still 22.9 down on pre-pandemic levels, as a result of chip shortages rampaging through the supply chain.

According to Jamie Hamilton, Deloitte’s automotive director and head of electric vehicles, things could look up in 2022.

“The good news for manufacturers and dealers is that supply pressures caused by the semi-conductor shortage are starting to ease,” he said. “The point at which supply issues are fully resolved, it’s likely we’ll see substantial pent-up demand released in the UK, which bodes well for the industry’s prospects in 2022.”

Analysts have forecast that by the end of the year new car registrations will rise 15.2 per cent on 2021 levels to 1.89 million units, down 3.7 per cent on October’s forecast of 1.96 million units.

“To negate these issues, fleets should look to leasing providers offering innovative, flexible solutions with the reassurance of price protection to facilitate the continued surge in EV uptake once the backlog has subsided,” said John Lawes, Hitachi Capital’s managing director of vehicle solutions.

““In the meantime, clarity from the government on how it plans to counteract the potential tipping point of EV tax breaks and Salary Sacrifice schemes coming to an end would be welcomed across the board.”