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For years, the new car sales market has served as a key economic engine in the UK. The gradual transition to hybrid and electric vehicles is threatening to challenge this status, however, particularly as the government continues to increase taxes on new diesel cars that no longer meet the national emission standards.
The most recent industry data saw new car registrations drop by 5 per cent in the year to date, putting them on course for their first annual decline since 2011.
In this article, we’ll look at the potential decline of the automotive industry as we know it and the issues that are causing this.
A look at the numbers – and the demise of diesel powered cars
Unsurprisingly, diesel cars have seen the most significant decline in the year ending November 2016, with sales falling by a staggering 11.2 per cent. Much of this has to do with the government’s decision to impose higher taxes On new diesel cars that do not meet the existing emissions standards, therefore penalising vehicles that emit the highest levels of nitrogen dioxide.
Additionally, we’ve also seen a number of reports recently which suggest that manufacturers will cease to manufacture diesel vehicles within the next 25 years. This has caused significant ripples in the market, with the most accurate data hinting that France will have imposed a complete ban on petrol and diesel cars by the year 2040. Even though the UK will not be a member of the EU at this time, it is expected to follow a similar time-frame and eventually outlaw the production of sale of all vehicles with traditional combustion engines.
The market-leading automotive brands are also likely to lead this charge, with Volvo having already pledged to end the production of such vehicles by 2019.
How is Brexit Impacting on the Industry?
While the inevitable transition to electric vehicles (and the prospect of lower emissions and congestion in bustling cities such as London) remains the primary reason for declining diesel sales, there are other factors at play too. The spectre Brexit offers a relevant case in point, as this continues to increase production costs and the bottom line price for the consumer.
According to Richard Perry at HantecFX, the recent data is indicative of how Brexit is impacting on numerous industries throughout the UK. “As Brexit negotiations continue, we’ve seen the value of sterling continue to depreciate. As a result, car manufacturers are being forced to pay higher import prices, which in turn means that the cost of new vehicles has increased and forced some consumers out of the market.”
Sales have fallen a consequence, and will probably continue to do so for as long as negotiations between the UK and the EU continue. The impact of rising import prices has also been exacerbated by a significant lack of real wage growth in the UK, as consumers have minimal disposable income to spend and even less to invest in big ticket items.
The Last Word
For now, there’s little to do but watch this space and see how the new car sales market fares in the UK. There’s no doubt that it’s braced for a period of decline and transition, however, as innovation and macroeconomic conditions combine to restrict the sale of diesel cars nationwide.