Within the newest version of AM Journal David Francis takes deep-dive into the UK’s new automobile registrations and asks: “Has the market lastly reached ‘peak premium?'”
October registrations (up 26.4%) appeared constructive however, in actuality, that determine solely introduced them again to the place that they had been in 2020 – itself hardly a terrific interval for automobile gross sales.
This has led the Society of Motor Producers and Merchants (SMMT) to downgrade its 2022 full 12 months forecast to 1.57 million – the bottom degree since 1982.
Put one other means, we’ve misplaced 40 years’ market development.
In fact, a good proportion of the autumn is all the way down to the chip scarcity. Europe is predicted to lose manufacturing of 1.5 million vehicles in 2022, out of a world whole of 4.2 million.
Manufacturing of automotive chips is forecast by Alix Companions to rise by 20% subsequent 12 months, however the massive query is whether or not that will probably be sufficient.
In some methods, the trade hopes that it’ll not. If a 20% improve is ample to fulfill demand, then the trade is in a deep recession.
Again within the current, Ford is barely out-performing the market, and has marginally prolonged its lead over VW.
In fact, this growth has been overshadowed by the information that, after 46 years and a world manufacturing run of 16 million, the Fiesta will probably be dropped in 2023.
The Focus won’t be far behind, as Ford strikes to VW platforms for small and medium fashions.
PREMIUM BRAND DECLINE
Behind VW, there’s a enormous battle for third place. No fewer than 4 producers (Audi, Kia, BMW and Toyota) have a market share of between 6.5% and 6.7%, with fewer than 3,000 items separating them.
Kia is the one one of many 4 producers to have elevated gross sales year-to-date (YTD), so could possibly be in place to complete in third place if it may well preserve its momentum.
Of the remainder of the High 10, the corporate with essentially the most combined emotions might be Nissan. It has the UK’s best-seller YTD within the Qashqai, however is just tenth general.
All its different current fashions have fallen by greater than the general market, so it wants the brand new Ariya to make a big effect if it’s going to get again to the 5%-6% share it used to take pleasure in.
Trying on the different finish of the gross sales chart for a change, a few the most important losers have been corporations that, some time in the past, may need been anticipated to have benefitted from the SUV increase.
Jeep, which was a giant presence within the Nineteen Nineties with the Cherokee, has seen one more market share collapse. It has bought solely 2,200 vehicles this 12 months (down 48.7%) for a market share of simply 0.16%.
Equally, Subaru, as soon as the go-to model for rural vets and other people dwelling on the finish of farm tracks, is down by 40.2% to a market share of simply 0.08%.
To place it one other means, Subaru sells roughly the identical variety of vehicles within the UK (1,056 YTD) as Ferrari (879 YTD).
It’s exhausting to see how promoting such small volumes of comparatively cheap vehicles might be commercially viable.
If Jeep and Subaru are to stay within the UK, they should provide you with one thing fairly radical after greater than a decade of regular declines.
General, essentially the most notable pattern amongst producers is the decline in market share of premium manufacturers after many years of inexorable development (see desk).
First, we should always set up what we imply by premium. We’d outline it as a producer inside mainstream segments that gives a extra prestigious model, so Land Rover could be in (the Evoque is a substitute for a Kuga), however Porsche could be out (the Macan is a phase increased).
General market share of premium manufacturers has slipped from 33.4% to 31.6%, and would have fallen additional, however for the sharp rise in Tesla gross sales.
VALUE BRAND GROWTH
On the similar time, market share of the 2 true worth manufacturers in the marketplace (MG and Dacia) has jumped from 2.8% to 4.9%.
Manufacturers comparable to Škoda and Kia had been worth manufacturers as soon as, however have long-since joined the mainstream – certainly they’d each declare that they’re positioned above some historically mainstream manufacturers.
Whereas it’s all the time harmful to take a few information factors and extrapolate a pattern, there does appear to be one thing attention-grabbing at work.
Electrification inevitably makes vehicles costlier, and other people’s actual incomes are falling, so one thing has to offer.
Dacia is providing a low-cost various to electrification (not less than for now), whereas MG is providing EVs at near petrol automobile costs.
It will be rash to imagine that premium vehicles at the moment are in decline, however it could not be unreasonable to assume that their days of relentless development could also be over.
By definition, premium is a relative time period, so premium fashions can’t turn into nearly all of the market.
Taking roughly one-third of the market could also be one thing of a pure ceiling. The identical logic appears to have occurred to BMW and Mercedes-Benz who say they’ll progressively scale back their presence in smaller vehicles (e.g. Mercedes will drop the A- and B-Class). Have we now reached “peak premium”?
Consideration is now turning to what we will count on in 2023.
The aforementioned chip scarcity will nonetheless constrain provide, however the larger fear is the extent of demand.
“Unprecedented” is probably essentially the most over-used phrase of the previous three years, however it’s exhausting to keep away from within the context of the autumn in family disposable incomes.
In accordance with the Workplace for Funds Accountability (OBR) the typical particular person will see their earnings fall by 2.2% within the 12 months to April 2023, the worst dip since information started in 1956.
In such circumstances, a brand new automobile could also be a good distance down the record of priorities for a lot of.
The SMMT is forecasting a market of 1.8 million for 2023: to place that into context, the typical for the 5 years from 2013 to 2017 was 2.5 million, and 1.8 million was the determine for 1993, as we began to return out of the early Nineteen Nineties recession.