The UK new car market has recorded its best year since the pandemic, with growth driven entirely by fleet investment.

New car registrations rose 17.9% as fleet investment accelerates but BEV market share slipped

Total registrations in the UK hit 1.9 million in 2023 – up 17.9%, according to latest figures from the Society of Motor Manufacturers and Traders (SMMT). The growth follows a strong December, with registrations up 9.8% in the 17th month of consecutive growth.

Fleet demand was the sole driver for growth across 2023; private buyer demand flat-lined as cost-of-living pressures and high interest rates constrained growth.

Registrations to larger fleets across 2023 rocketed 38.7% and accounted for over a million cars, giving a 54.7% market share compared to 46.5% for 2022.

Take-up by smaller business fleets – companies with fewer than 25 vehicles – fell 1.5% to 44,031 units, with a 2.3% market share (2.8% for 2022).

Combined fleet registrations totalled more than 1,085,381 cars – up 36.4% from the 795,553 in 2022 and with an overall 57% market share compared to 49.3% last year.

Private buyer demand plateaued at 817,673 units (down 0.1%) after a strong recovery in 2022 when carmakers prioritised sales to consumers. Market share fell from 50.7% in 2022 to 43.0%.

Despite the growth, the overall new car market remains 17.7% below pre-pandemic levels, but surging demand compared to 2022 saw 288,991 additional vehicles reach the road. Superminis, dual purpose and lower medium cars remained most in demand, accounting for 29.8%, 28.6% and 28.2% of the market respectively.

Last year also saw battery electric vehicle (BEV) volumes reach a record volume – up by almost 50,000 units with 314,687 new registrations. While BEV volumes actually fell by 34.2% in the last month of the year, the SMMT said this reflected an “abnormal” December 2022 when significant numbers of orders were able to be fulfilled in the month. It’s also believed to be linked to the ZEV mandate sales quotas now in effect for 2024.

Hybrid electric vehicles (HEVs) recorded robust growth, up 27.1% to reach a 12.6% market share. Plug-in hybrids (PHEVs) also enjoyed a strong year, with a 39.3% increase in registrations to account for 7.4% of the market. Demand for low and zero-emission vehicles meant average new car CO2 fell by 2.2% to 108.9g/km.

Nonetheless, BEV market share across 2023 slipped to 16.5% – significantly lower than the 22% zero-emission car sales quota that carmakers are now required to hit for 2024 under the newly implemented ZEV mandate.

The industry has renewed its calls to the Government to support BEV take-up with much-needed incentives for private buyers to match the tax benefits for business drivers.

While BEVs accounted for one in six new cars registered in 2023, the majority were taken by business and fleet buyers who benefit from such compelling tax incentives. In contrast, one in 11 private buyers chose a BEV.

Since the end of the Plug-in Car Grant in June 2022, the UK is the only major European market with no consumer BEV purchase incentives – but it is now also the only market with mandated minimum targets for new ZEV registrations.

In particular, the car sector is calling for the Treasury to halve VAT on new BEVs for three years – which it says would enable more drivers upgrade their existing petrol or diesel car to a new zero-emission alternative, widening the future supply of used electric vehicles and making investment in charge point rollout even more compelling. This would also have a profound impact on the UK’s carbon footprint, reducing road vehicle emissions by more than five million tonnes cumulatively over the next three years.

Mike Hawes, SMMT chief executive, said: “The challenge for 2024 is to deliver a green recovery. Government has challenged the UK automotive sector with the world’s boldest transition timeline and is investing to ensure we are a major maker of electric vehicles. It must now help all drivers buy into this future, with consumer incentives that will make the UK the leading European market for ZEVs.”

‘Tariff hit avoided but lack of EV infrastructure and incentives remain’

Jon Lawes, managing director at Novuna Vehicle Solutions, said that while the EU and UK’s 11^th hour deal to avoid EV tariffs was much welcome, the lack of EV infrastructure and incentives remain barriers to BEV uptake.

He commented: “Whilst fleets continue to charge ahead with EV adoption, policymakers must demonstrate greater ambitions during 2024 to inspire confidence in the transition and help the industry make good on the new ZEV mandate taking effect this week.

“The last-minute reprieve on the costly Rules of Origin tariffs was a crucial moment for EV adoption, but inadequate charging infrastructure coupled with the lack of incentives to convince non-fleet drivers to make the switch remain significant barriers to realising wider EV growth and still need addressing.”

Meanwhile, the Electric Vehicle Association England pointed out that EVs have come a long way since representing little over 2% of sales a decade ago – but said the sales figures showed the impact of EV scaremongering by some of the mainstream media last year.

James Court, chief executive of EVA England, commented: “It is unsurprising that after a year of negativity from vested interests we have seen a slight dip in sales, but encouragingly our latest survey found nine in 10 EV drivers would not return to petrol and diesel, meaning the vast majority of owners are seeing the real benefits of zero-emission driving.

“Clearly, the Government must play its part in ensuring EVs are made as affordable as possible for drivers of all incomes, whilst continuing to oversee that the whole EV ecosystem is ready for an electric future.”

Nick Williams, managing director, ​Lex Autolease, part of Lloyds Banking Group​, also said the figures showed that more needs to be done by policymakers, OEMs and the wider industry to drive EV adoption levels.

“Efforts must be focused on the continued rollout of charging infrastructure, driving down new vehicle costs and providing OEMs with the confidence they need to invest in the long-term, all of which will be key to generating the used market, essential in making electric vehicles more accessible and achieving widespread adoption in the future.”

“There is undoubtedly more to do to, however we are moving at pace with an excess of £3bn of lending as part of our £8bn commitment by 2024, and we hope to exceed this commitment this year. We have several key projects set to launch in the first half of this year focused on making it easier for our customers to switch to an electric vehicle.”

Finally, EY has warned that the ZEV mandate poses a key challenge.

David Borland, EY UK & Ireland Automotive Leader, said: “The disparity between the timing of the ZEV mandate and the delay to the internal combustion engine (ICE) vehicle sales ban will continue to represent one of the most marked challenges to the UK’s EV transition going forward, as OEMs attempt to provide a more compelling proposition to consumers to make the switch. And with question marks remaining around the residual values of EVs, while the current profitability of EV sales appears stretched, the road ahead will certainly be a complex one.”

He also said that striking the right balance between ICE and EV priorities will be critical for carmakers.

“The ZEV mandate will prompt OEMs to place an increasing focus on EVs and how they manage the complexities of product planning, but the full portfolio of powertrain technologies must continue to be considered. With plug-in hybrid electric vehicles (PHEVs) having the highest growth of all powertrain types at nearly 40% for the year, it is clear that they are part of the solution to provide consumers with comfort amid any hesitancy they may have to go all electric in the near term.”