MarketLine Blog

UK new car sales surge

If you want a quick way to judge how an economy is performing, you could do a lot worse than look at how new cars are selling. For most of us, a car is a considered purchase, not an impulse buy. It may require us to dig deep into our savings, or take out a sizeable loan. These are not actions we are likely to take if we see a salary freeze or unemployment looming. As a result, the number of cars sold is highly sensitive to macroeconomic conditions: during a recession, a couple of percentage points decline in GDP can accompany a double-digit collapse in annual sales.

So it was good news for the UK when the Society of Motor Manufacturers and Traders announced that March 2014 had seen a big surge in new car sales. With nearly 465,000 vehicles freshly registered, the market was nearly 18% up on March 2013. In fact, you would have to go right the way back to 2004 to see a stronger March performance.

The month is significant, because in the UK license plates have a biannually-changed date code. Buying a car in March or September means you have the most up-to-date code, which gives the market a boost in those months.

While March sales volumes were similar in 2004 and 2014, the market has changed in other ways. There has been a shift in favor of smaller cars, with sales in the mini category more than doubling. And, for the average new car, miles per gallon have increased, while CO2 emissions have decreased. Perhaps to reflect this greater environmental purity, the most popular color has changed from silver to white.

It was a particularly good month for Ford, whose Fiesta and Focus models alone accounted for nearly one car in every ten sold. However, it is the Vauxhall Astra, which ranked fifth in terms of sales, that may have more economic significance. While Ford’s UK factories are primarily for components, GM subsidiary Vauxhall has an Astra assembly plant at Ellesmere Port. In 2012, it was announced that the factory would be making the new model Astra from 2015 until at least 2020. High productivity and an agreement by employees to accept flexible working plans were key reasons for the decision. If the new car market retains its current buoyancy, this bodes well for the UK manufacturing sector.

For further reading, take a look at Ford Motor Company Company ProfileGeneral Motors Company Profile and Car Manufacturing in the United Kingdom Industry Profile.

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