Fears and uncertainty concerning the future of diesel-fueled automobiles in the United Kingdom have ushered in a massive drop in new car sales. Compared to March 2017, the UK saw a decline of nearly 16% in 2018. What does that mean? It meant one year ago, there were more than 2.5 million new automobiles sold to consumers that were not purchased this year. This is a major drop and a big concern for the far-reaching automobile industry.
What sparked the change?
The five-year period before 2017 was quite healthy. But 2017 will be an unusual and chaotic period in the books. In March of 2017, things looked good for the booming industry. Record sales were being reported. However, in November of that year, the budget reflected a tax increase on diesel. This came with talks of cleaning up the air and where diesel-fueled automobiles fit into that equation. By December, sales dropped nearly 14%. More than 150,000 diesel-fueled automobiles were sold in December of 2016 that were not sold in December 2017.
Alternative Fuel Cars
The industry is seeing a modest increase in alternative-fueled cars. The increase equals about 119,000 vehicles being purchased that operate with fuels other than diesel. However, less than 14,000 of those vehicles were powered solely by electricity. Hybrids were in the mix. The numbers were simply not nearly high enough to sustain the staggering industry.
A secondary but important issue
86% of the automobiles bought and sold in the UK are imported, primarily from Britain. Citizens refrain from making these high-cost purchases due to a higher exchange rate. As the UK prepares to pull away from the EU (a decision that was decided by a 52% vote), the repercussions are being felt across the country. UK car manufacturers are in a panic. The majority of their product is shipped to Europe. Going it alone could mean a 10% tariff could be put on each vehicle they produce. Many people wish they could reverse their vote.
What next?
Car manufacturers are feeling the pinch, and the pain is being shared all the way down the chain. As manufacturers and suppliers determine where to put their money, the voice of the UK’s people is heard loud and clear.
Uncertainty is bleeding the industry, and decisions need to be made to allow the bleeding to stop. People will hold their money and wait until they know where this will fall. Unfortunately, the lack of a clear action plan is fanning the flames of fear. The world is watching the UK see how this unfolds. Without a decisive plan of action, it may not end well. The financial punch to the gut will be tough to recover from steel manufacturers to assembly lines. The numbers are still dropping, and only time will tell when they will stop and how the world’s economy will handle the new normal for the automotive industry.
