Cox’s most optimistic outlook puts UK registrations up nearly 16% on 2023
Cox Automotive forecasts up to 2.2m registrations, but low-margin fleet sales and ZEV penalties are retail headwinds
Industry giant Cox Automotive predicts the UK new car market will exceed two million registrations in 2024.
The firm, which owns a suite of automotive companies including Manheim Auctions, has forecast a ‘baseline’ (most likely) registration figure of 2.06m, along with potential ‘downside’ (worst case) and ‘upside’ (best case) estimates of 1.93m and 2.20m units.
The baseline figure would leave 2024 registrations up 8.3% year on year. Downside and upside scenarios would herald increases of either 1.2% or 15.8%.
The baseline estimate is more optimistic than the SMMT’s most recent 2024 new car sales forecast, published on 5 February, of 1.974m registrations – a 3.8% increase.
Irrespective of the final figure, Cox expects the strongest growth in the third quarter (July to September), anticipating a rise of 15% to 577,000 units in its baseline scenario, with 7% (497,000) and 25.6% (630,000) for the downside and the upside.
The company also predicts a strong second quarter (April to June), with registrations up 9.3% to 497,000 units (baseline). Upside and downside estimates would see it rise by 19% to 542,000 units or level with 2023 at 455,000.
In each scenario, the final quarter is expected to be the year’s weakest, with a year-on-year drop in registrations in two out of three cases. Baseline would see a fall of 2.4% to 440,000 units, downside a drop of 14.6% to 385,000 and upside a 7.4% rise to 484,000.
Cox has revised its forecast upwards in the wake of the new car market’s 10.4% leap in quarter one, which it described as “not to be sniffed at”. According to its latest Insight Quarterly report, the baseline figures anticipate “sustained demand” for cars from the fleet sector alongside continually low interest from private buyers.
“Inflation and interest rates are expected to ease at a slower pace than initially forecast, adding to uncertainty surrounding living costs and energy prices,” the report added. “Consequently, consumer confidence remains low. Despite these hurdles, a gradual improvement in consumer confidence is anticipated.”
Fleet sales had a 57.4% lead over retail in the first three months of 2024, according to the SMMT. The former racked up 326,454 registrations (up 28.9% year on year) next to the latter’s 207,346 (down 9.2%), leaving them with respective market shares of 59.8% and 38%. In pre-pandemic years, the sectors were typically much closer together, with a difference of less than 10% between them.
Cox’s insight director, Philip Nothard, described the ratio as “a bitter pill to swallow for OEMs and dealers, as private registrations are where the healthier margins can be found, as was demonstrated during the supply constraints of the pandemic. “On top of that, consumer doubts about the transition to electric, perhaps fuelled by EV affordability and infrastructure fears, persist. Steadfast support from fleet operators has played a crucial role in driving the transition to an electrified market and the recovery of sales volumes. These advancements would undoubtedly be less substantial without their continued backing.”
He added that there was cause for optimism, particularly in the middle of the year, but highlighted that, in each of the three scenarios, the 2024 market would still fall short of pre-pandemic volumes.
“The market is moving in the right direction [and] a gradual recovery could arguably be said to be under way,” he said. “However, it’s important to acknowledge that significant challenges remain. We’re not quite out of the woods yet, and a full return to pre-pandemic levels might still take some time.
“The numbers are charged with positivity, but the market is a long way off what could reasonably be characterised as ‘normal’.”
If Cox’s baseline prediction comes to fruition, the 2024 UK new car market would be 10.8% below the 2000-2019 average. Downside and upside scenarios would trail it by either 16.7% or 4.7%.
Cox also believes the ZEV mandate could cause manufacturers with a low mix of electric cars to gradually reduce the overall number of vehicles they supply to the UK market.
The ZEV mandate, which is unique to the UK, began in January and stipulates that at least 22% of each manufacturer’s 2024 new car registrations (10% for vans) are zero-emission vehicles, gradually rising to 80% in 2030 and 100% in 2035.
Manufacturers that fail to comply could face fines of £15,000 per car sold (£18,000 for vans) but, until 2026, they will be able to borrow allowances from other manufacturers that have exceeded the targets to buy more time – although borrowing incurs a 3.5% annual interest fee.
The average market share for battery-electric vehicles across all manufacturers was 15.5% in the first three months of this year, according to the SMMT – up by just 0.1% year on year.
“There are two ways of looking at the 22% from a manufacturer’s perspective,” said Nothard. “’Do I try to reach the percentage, or do I reduce the overall [volume] to increase my percentage of EVs?’
“There’s a bit of noise now that the manufacturers are thinking: ‘Do you know what? I could reduce my overall allocation to the UK marketplace, reduce my ICE volume and increase my percentage of overall BEV registrations within the market, so we achieve our 22%.’ That means they won’t get the [broader] market share, but it will save them borrowing the money at 3.5% or paying fines – and that’s dangerous for the UK market. [They] may change tack and opt to put their cars into less stringent markets in other parts of the world.
“Yes, the needle isn’t moving quickly in terms of reaching the 22%, but by hook or by crook, there’ll be tactical registrations, there’ll be credit purchases, there’ll be debt. One way or another, the manufacturers will play the game, either by reducing production or allocations to the UK market, they’ll buy credits or they’ll borrow from the government at 3.5%.”
He added that ZEV mandate could also cause the industry to become increasingly reliant on Chinese EV manufacturers to meet the target. Speaking at the SMMT conference in March, transport secretary Mark Harper said the UK would apply trade sanctions if the market were flooded with low-cost EVs from state-backed Chinese OEMs.
Last week, Stellantis boss Carlos Tavares described the ZEV mandate as a “terrible thing for the UK” and suggested it could “kill” the domestic automotive industry. He proposed that electric commercial vehicle sales be counted as part of each manufacturer’s ZEV quota, and suggested that each UK-built car should also count towards its manufacturer’s tally.
