UK car sales fell by a fifth last month from a year earlier as semiconductor shortages continued to loom and industry worried about the impact of the inflation in the market.
New car registrations in the UK fell 20.6% year on year to 124,400 in the second weakest month of May since 1992, according to the Society of Motor Manufacturers and Traders (SMMT), a group depression.
New and used car dealerships have seen strong demand for vehicles since dealerships reopened after the first Covid pandemic lockdowns in 2020, allowing wealthier households to save more.
However, automakers have been unable to take advantage of demand due to the crisis in global supply chains, the semiconductors used to make the computer chips that control everything from entertainment systems to windshield wipers. windows and car batteries, being particularly rare. Intel chief executive Pat Gelsinger said last month that he doesn’t expect the shortages to end until 2024, later than most automakers predict.
Other rare parts include wiring harnesses, relatively simple components that group the cables used to control different systems in a car. Several automakers sourced wiring harnesses from Ukraine, where production was disrupted by the Russian invasion.
The SMMT said UK automakers were focusing on delivering electric vehicles as they tried to meet tougher carbon emissions regulations. Electric vehicles accounted for almost a fifth of all new car sales in May, and 14% in the year so far with a record 92,000 sales.
Overall, the UK new car market remained almost a third below the pre-pandemic level of 2019 despite all the orders on the books of manufacturers.
The auto industry is warning that high inflation could stifle demand for new cars in the coming months as consumers have less money to spend and become less likely to take out the large loans usually used to buy new cars.
Sue Robinson, chief executive of the National Franchised Dealers Association, another lobby group, said “increasing cost of living pressures in the UK” were also contributing to the “subdued new car market”, as well as a the shortage of chips.
Mike Hawes, Managing Director of SMMT, said: “In another challenging month for the new car market, the industry continues to struggle with global parts shortages, with growing adoption of battery electric vehicles being one of the few positives.
“Deliver on net zero [carbon emissions] means rapidly renewing the vehicles on our roads, but with rising inflation and squeezing household incomes, this will be increasingly difficult unless businesses and private buyers have the necessary confidence and encouragement to do it.