Car sales set for worst year since 1982

New car sales forecast to fall to low not seen since 1982 with dealer closures threatening to mean automotive factories shutting down

Sales of new cars fell to a nine-year low in October with the Welsh “fire break” that closed dealers accounting for half of the decline.

Registrations of new cars during the month slipped by 1.6pc to 140,945, taking the year-to-date total to 1.384m - down almost a third.

Poor sales figures drove the Society of Motor Manufacturers and Traders (SMMT) to issue a grim forecast for the full year.

It now expects 2020 to be worst performance by the British car industry in almost 40 years, with sales at a low not seen since 1982.

The trade group downgraded expectations for sales this year to 1.56m, down from the 1.66m it forecast in May, and far below the 2.25m expected at the start of the year before coronavirus struck.

The SMMT calculated the decline will be worth £22.5bn in lost sales.

Downgraded expectations come with dealers in England forced to shut for four weeks from Thursday, driving the lower forecast on evidence seen in Wales after its two-week closure.

SMMT bosses described the industry as “pinning its hopes” on motorists willing to buy cars online and “click and collect them to avoid a repeat of spring’s market wipe-out”.

However, there are doubts many will be willing to make such large purchases online.

Sales in April, the first full month of the initial lockdown, fell 97pc with just 4,321 cars delivered to drivers.

Andrew Burn, head of automotive at KPMG UK, said: “What is really clear is that the winners in the sector are likely to be those who embrace online and remote selling as this will undoubtedly be the growth sales channel in the months to come.”

However, the SMMT raised concerns about how attractive online sales will be and the potential knock-on effects. 

Mike Hawes, the lobby group's chief executive, said: “When showrooms shut, demand drops, so there is a real danger that with England today entering a second lockdown, both dealers and manufacturers could face temporary closure.

"What is not in doubt, however, is that the entire industry now faces an even tougher end to the year as businesses desperately try to manage resources, stock, production and cashflow in the penultimate month before the inevitable upheaval of Brexit.”

The industry has appealed to be allowed to keep dealerships open. It argues that car showrooms are generally larger than many other retailers that are allowed to keep trading, and also have lower customer volumes - often by appointment - making them safer.

The registration figures came as online car sales platform Auto Trader issued half-year results in which it said it would offer customers free advertising for December.

Nathan Coe, chief executive, said because the system is so key to many small dealers, the cost of advertising could quite possibly push some of them to collapse during the second lockdown.

In the six months to the end of November Auto Trader reported revenues down 37pc to £118.2m and pre-tax profits halving to £66m.

Offering free advertising in April and May and discounts in June contributed to the profit fall, with each month space was given away racking up a loss of between £5m and £7m.

Mr Coe said the spectacular rebound in the car market once dealers reopened after the last lockdown had meant the FTSE 100 was planning to reinstate its dividend but this has now been pushed back.

He added: “Until Saturday’s announcement the dividend looked pretty good but after news of another lockdown it doesn’t feel like the right thing to do.”

Shares in Auto Trader dipped 1.85pc to 583.4p.

Car dealer and distributor Inchcape also updated the market on Thursday, saying in the quarter to the end of September sales were ahead of expectations at £1.9bn, though this was almost a fifth lower than the same period last year.

US automotive giant GM also posted better than expected third-quarter profits, helped by strong demand for pick-up trucks.