Media post: Is It the Right Time to Lease a Vehicle?

The past few years have been interesting for the global automotive market. A number of supply chain issues, technological disruption, and a squeeze on real-term wages have all contributed to slump in sales throughout 2022. So, what’s behind these trends, and can we expect them to persist?

UK Car Sales Falling

According to figures released by the Society of Motor Manufacturers and Traders, new car registrations in the UK fell by 9% in July 2022, reaching 112,162 vehicles. It’s the fifth consecutive month in which registrations have declined – though the rate of contraction isn’t as steep as it had been.

The rate of decline isn’t consistent across all sub-categories. For petrol cars, it’s 7.2%, for diesels, it’s a whopping -29.3%. In some cases, we’ve actually seen an increase in registrations. Battery Electric Vehicles rose by 9.9%, grabbing an impressive 10.9% share of the market.

Much of the decline is being felt by fleet operators, who saw their registrations fall by 18.2%. This may affect those looking to lease a vehicle. For private customers, there’s actually been an increase of 3.7%, as manufacturers seek to protect their reputations with the general public.

Factors behind this trend

Several factors have contributed to this slump in demand. Ongoing semiconductor shortages have been exacerbated by Covid-19 related lockdowns in China and other manufacturing hubs. There’s also an ongoing fuel crisis, which has driven the cost of petrol up towards the £2 per litre mark, and the fact that the government has recently scrapped the grant for plug-in car drivers.

Outlook for 2023

At the start of the year, we might have expected some form of normality to have reasserted itself – but the industry found itself taken by surprise, like the rest of the world, by the Russian invasion of Ukraine. Much like the Covid-19 pandemic, this was something that few predicted – and so it would be bold to try to anticipate what’s coming in 2023.

With that said, there are things we might be reasonably sure of. The pivot to some form of hybrid working, wherein large swathes of the population spend a portion of their working weeks at home, means that there isn’t as much demand for road travel, and for cars. This is unlikely to reverse in the medium-term.

We should also consider how difficult it is for manufacturers to ramp production up and down. This applies especially to the semiconductor industry, where it can take months on end for a single batch of chips to come off the production line.

The demand for new chips is being pushed not just by the motoring industry, but by a whole range of manufacturers of household goods. What’s more, the cars of the future are likely to be more reliant on computer chips rather than less.