Little sign of pent-up demand as new car sales stay well below 2019 levels
THE reopening of car showrooms saw sale of new motors rocket by 2,000 per cent in June, but figures stayed well below 2019 levels, hinting that consumer spending could remain stifled as lockdown restrictions are eased.
Some 3,278 new cars were registered in the north last month after showrooms reopened on June 8.
It followed two months where just 168 new vehicles were registered.
Industry insiders have been hopeful that the lockdown would result in pent-up demand, unleashing a spike in sales to assist the recovery.
While there was a 2,176 per cent spike, sales were still 36.6 per cent below the 5,170 new cars sold in June 2019, making last month the worst June since the Society of Motor Manufacturers and Traders (SMMT) began recording registrations.
Ulster Bank’s chief economist Richard Ramsey said that even went adjusting the data to reflect the fewer opening days in June 2020, sales were still 21 per cent behind June 2019.
He said all six months of 2020 to date had attained the dubious title of ‘worst month of sales on record’.
Overall, Northern Ireland’s new car retailers are 50.8 per cent behind were they were last year, equivalent to 15,674 fewer new cars sold.
Mr Ramsey said that the Covid-19 pandemic had exacerbated a long-term downward trend, with 2020 set to be the sixth successive year of flat or falling new car sales.
He said 2014 was the last time Northern Ireland dealers posted a meaningful increase in sales.
“There is very little sign of pent-up demand for new cars,” said the economist.
“One factor that may be holding back some demand concerns expectations for a VAT cut or ‘cash for clunkers’ scheme.
“Both of these temporary measures were introduced following the last recession. It remains to be scene what stimulus measures the Chancellor announces with his Economic Statement on Wednesday.
“However, any measures on VAT are likely to be much more targeted than last time around. I don’t foresee a universal temporary VAT cut for all consumer spending as was the case over a decade ago.
“Instead any VAT rate cut is likely to be targeted on the hospitality and entertainment sectors.
“We may see a more targeted ‘cash for clunker’ scheme linked specifically to the purchase of electric vehicles and incentives targeted at more environmentally friendly vehicles.”
Mr Ramsey said the last recession had resulted in a shift smaller vehicles. He said the consequence of the current economic slump could well change habits father, with sales of bicycles already surging in recent months.
“Consumers’ transport needs and motoring requirements could well be very different to what they were a few months ago,” he said. “And this is before the financial implications of the current recession are taken into account.”