New car sales fell by more than a fifth in August as vehicle deliveries continue to be hampered by a global chip shortage, industry figures confirm.
Just 68,000 new models were registered in Britain last month, which is 21,000 less than August 2020 – a decline of 22 per cent annually.
August is traditionally a quieter month for motor registrations ahead of the plate change in September.
However, there are concerns that car production restraints caused by the short supply of semiconductor chips could badly hit figures for September too.
Stalling new car sales continued in August: Auto makers are being hit by a shortage in supply of microchips for their latest vehicles
Manufacturers, including Jaguar Land Rover, are warning of waiting times of more than a year for some models which has seen some buyers increasingly considering used cars instead..
The Society of Motor Manufacturers and Traders, the industry trade body, said it was the worst August performance for car sales since 2013, with registrations down 7.6 per cent on the decade average for the month.
Demand for new fully electric, hybrid and plug-in hybrid vehicles, however, surged.
Registrations of all-electric models rose by a third while conventional hybrids posted growth of 46 per cent.
The biggest increase in year-on-year demand was for plug-in hybrids, rising by 72 per cent compared to August 2020 as buyers continue to be enticed by the option of having both internal combustion and electric power.
The SMMT suggests the resurgent popularity of PHEVs has partly been driven by the Government’s decision to slash the Plug-in Car Grant available to fully electric vehicles in March.
The latest published data shows that half of all sales in August were driven by private consumers, with registrations for business and fleet operators falling the most.
Private registrations now account for half of all new models entering the road
Last month was the worst August performance for car sales since 2013, with registrations down 7.6% on the decade average for the eighth month of the year
Despite the August decline, new car registrations remain up 20 per cent annually. However, that’s only due to the plunge in sales during the first lockdown a year ago.
Closer inspection of the figures shows that total registrations in 2021 are behind by a quarter against the 10-year average, which ‘illustrates the ongoing and wide ranging impact of the pandemic on automotive retail,’ the SMMT said.
Mike Hawes, its chief executive, said August figures ‘not wholly surprising’, though ‘still disappointing’.
‘The global shortage of semiconductors has affected UK, and indeed global, car production volumes so new car registrations will inevitably be undermined,’ he explained.
‘Government can help by continuing the supportive Covid measures in place currently, especially the furlough scheme which has proven invaluable to so many businesses.
‘As we enter the important September plate-change month with an ever-increasing range of electrified models and attractive deals, buyers in the market for the new 71 plate can be reassured manufacturers are doing all they can to ensure prompt deliveries.’
Richard Peberdy, auto market expert from KMPG, said the chip shortage will spark ‘unusually low numbers registered on the new ‘71’ plate in September too’
Jim Holder, editorial director at What Car?, said the microchip shortage is extending delivery times for new models and providing a smaller pool of cars for motorists to choose from.
It was recently revealed that some Jaguar Land Rover models are subject to waiting times of over 12 months due to the shortage of chips, while other brands are estimating lead times of around 16 weeks if drivers place an order today.
Some car makers – including Ford – are even introducing new trim levels of their existing cars that have fewer safety and convenience features requiring semiconductor chips in order to keep production lines running.
‘Estimates suggest it won’t be until early 2022 before the supply constraints ease and production levels start to recover,’ Holder warns.
‘Until then, buyers will have to accept longer waiting times, or consider looking at alternative models or the used market.’
Richard Peberdy from KMPG added that the chip shortage will also see ‘unusually low numbers registered on the new ‘71’ plate in September too’.
Jamie Hamilton, automotive director and head of electric vehicles at Deloitte, said chips supply issues will undoubtedly impact registrations in September and is likely to do so each month into the first half of next year.
He said: ‘All eyes will be on September, with plate change months traditionally leading to some of the biggest months for new car sales.
‘Whilst there will be consumer interest in the new 71-plate, some in the industry are tempering their expectations. Dealer pre-registrations are significant contributors to September’s figure but the motive to pre-reg may be lower-than-normal, as some manufacturers have softened dealer targets and are currently only building to order, anyway.
‘The issues surrounding the supply of new cars has continued to push people towards the used car market. This has resulted in the average price of a used car being close to £15,000 – 11 per cent higher than last year.’
The Vauxhall Corsa has extended its lead over the Ford Fiesta as the most-bought new car in 2021, though it was the Ford Puma (driven by big demand in Wales and Northern Ireland) that topped the sales charts last month
The Vauxhall Corsas rise to the top of the UK sales charts is partly due to the availability of an all-electric Corsa-e model, which is proving popular with British buyers
In terms of which passenger car models were most popular last month, the Ford Puma topped the list for the first time ever with 1,801 registrations.
The compact SUV has been the best-seller in Northern Ireland in 2021 and second most popular in Wales.
Motorists in England and Scotland have bought Vauxhall Corsas in the highest numbers, which has seen the supermini extend its registrations lead over the Ford Fiesta. Some of these will be Corsa-e electric models, while Ford has yet to launch an electrified version of its rival.
If the Corsa does out-sell the Fiesta, it will be the first time the small Ford will be toppled from the peak of the sales standings for 12 years.
While the Puma was the best-selling car, it wasn’t the most registered vehicle in August.
Some 3,592 new Ford Transit Customs were registered last month along with 2,161 standard Transits, with van demand continuing to surge with delivery businesses booming since the Covid-19 pandemic struck.
Why is there a chip shortage?
A shortage in microchip supplies is crippling production lines across various industries right now – none more so than car factories.
Computer chip makers – like all other manufacturers – temporarily shut down operations when the virus first hit at the beginning of 2020.
However, massive demand from tech companies triggered a quick restart to try to fulfil sky-rocketing orders for laptops to work from home, as well as tablets, games consoles and other devices to keep people occupied during lockdown.
Though one product type that didn’t see demand return to normal levels with such an immediate effect was new cars.
With auto factories closed, showrooms locked and makers fearing a fall in big-item spending and a general tightening of consumer purse strings, automotive budgets were revised and orders for car parts – including electronics – put on hold.
Despite all this happening more than 12 months ago and production outputs of chips now back to more normal levels, car makers can’t get their hands on enough of them and backorders for cars have mounted up. This is causing headaches for anyone with intentions to purchase a zero-mile motor this year.
The latest new cars can use over 40 microchips from varying suppliers, which shows the scale of demand for the parts
Are new cars really so reliant on computer chips?
While you might think they’re only used in computers and other tech products, every new car uses microchips. And some of them use dozens.
They control a number of features in modern vehicles, from safety devices like airbags to infotainment screens and automatic parking assistance.
It means individual cars – especially lavish, tech-heavy models – can use over 40 chips from varying manufacturers.
It gives you an indication of just how reliant car makers have become on these components.
While some semiconductors needed in vehicles have been around for ages and are ‘old-hat’ in the world of chip technology – like those used for controlling the ABS braking or monitoring the exhaust emissions – others required to power complex high-definition digital displays, manage assisted-driving features and to help mitigate crashes are far more advanced.
The latter are also in highest demand.
Factories making semiconductor computer chips need to be ultra-clean, dust free and void of static electricity. With such a tough and volatile production environment, outputs can be slow
And producing specialist chips isn’t straight forward – or cheap.
Factories making them need to be ultra-clean, completely dust free and void of any static electricity. And for these reasons the production process isn’t what you’d call lightning fast.
Add to the equation that cars aren’t high on chip suppliers’ priority lists and you can begin to understand why the sector is being hit so hard.
With tech products, like smartphones and televisions, having shorter sale and life-cycles, brands developing and producing them at pace are placing the biggest orders for the latest, most expensive – and most profitable – chips going.
Given that these orders are more lucrative for semiconductor producers, car firms are being bumped down the list for the parts.
Mini was forced to temporarily shut its Oxford plant earlier this year having ran out of chips
When will the chip shortage likely end?
Car bosses, including Stellantis’ Carlos Tavares, fully expect the chip shortage to drag on into 2022.
The parent company of brands including Fiat, Peugeot, Citroen, Alfa Romeo and many more was forced to pause production at eight of its 44 global factories in the first quarter of the year – and as a result produced 190,000 fewer cars than originally projected.
‘The semiconductor crisis, from everything I see and I’m not sure I can see everything, is going to drag into ’22 easy because I don’t see enough signs that additional production from the Asian sourcing points is going to come to the West in the near future,’ Tavares said in July.
That means delivery delays for new cars could get even longer and average prices of used motors might remain as high as they are today, if not rise further.
Jim Holder at What Car? said appetite for car buying is ‘clearly there’ but the challenge for manufacturers and retailers is to ‘manage customer expectations and to build pipelines in the meantime, while supply is limited’.
Carlos Tavares, the man at the top at mega car firm Stellantis, says the chip shortage for vehicles will definitely drag into 2022…
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