UK new car supply should improve over the next 12 months as OEMs react to the growing number of Chinese brands launching in the UK.

Alex Wright, SVA’s managing director

The semiconductor shortage is already lifting according to reports and Shoreham Vehicle Auctions (SVA) said carmakers risk losing valuable sales and market share if they don’t increase their production capacity in response to the growing threat from newer arrivals.

Brands such as MG are increasing taking a hold on the new car sector, thanks to their value-for-money approach, combined with having petrol and EVs cars in dealer stock or with minimal delivery delays.

New car sales data bears this out; in 2022, MG reported a 66.8% sales increase in the UK to 51,050 cars, more than established brands such as Škoda, Citroën and Honda and just 1,200 cars behind Peugeot.

MG’s work to offer buying terms to leasing and rental companies will further accelerate sales. Both sectors have been hard hit by the lack of new cars, leading to longer vehicle running cycles.

Such high levels of value and availability won’t just be limited to MG either, and SVA managing director Alex Wright expects the growing number of Chinese manufacturers targeting the UK to offer similar advantages.

This will leave some big decisions for established carmakers. While some brands have been hard-hit by the chip shortage and resultant production downturns, others have reported increased profits from being able to command higher prices on the back of elevating demand.

This could change though as newer brands come to the UK.

“OEMS will have to decide whether they want to protect their market share and compete with the new Chinese brands that have a very strong proposition and product availability,” explained Wright.

Cavalry coming for fleets?

For fleets, the arrival of increased new car supplies can’t come quick enough. Alongside the challenges seen at rental and leasing businesses, end-user fleets have also been hard hit.

Speaking late-2022, Paul Hollick, chair, Association of Fleet Professionals, said that while new car supply has been a major issue for fleets ever since the onset of the pandemic, feedback from its members showed supply issues were persisting – with supply being patchy and, at worst, non-existent.

As a result, some fleet drivers have had to go through the process of choosing a new car half a dozen times before finding one for which a manufacturer will even provide a production slot – and that date has been likely to be a year or more away. It’s also been a common occurrence to see repeat cancellations once orders have been accepted.

The fleet sector’s struggle for new car supplies is borne out by new car registration figures – latest data from the SMMT showed the total figure for 2022 fell 2.0% to 1.61 million, while registrations by larger fleets declined 7.5% due to carmakers prioritising more profitable sales to private buyers.

SMMT data also shows that UK annual car production for 2022 fell to its lowest level since 1956; output declined 9.8% compared to 2021 but was more notably down 40.5% on the 2019 pre-pandemic output.

Increased new car supplies to ease pressure on used sector

Not only will improving new car supplies “reignite” new car sales, but they will also ease the pressure on the used market, SVA’s Alex Wright noted.

He also noted a current challenger where some used car prices are on par with new cars.

“Currently, consumers have the option of buying a brand new fully warranted new car on competitive finance or a three-to-four-year-old used car for the same price outside the manufacturer’s warranty. It reminds me of when Daewoo launched in the UK and its new prices were more in tune with used cars,” said Wright.

“OEMs have increased new car prices to help get round this anomaly, but due to inflation used prices are likely to remain high for the foreseeable future. The same type of used cars we sold at auction in 2018 for £9,000 are now selling for £18,000 which gives you some idea of how the market has moved in recent years,” he added.