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New car registrations predicted to increase by 6% in 2023

Cox Automotive predicts that new car registrations will increase by 6% in 2023 to 1.71 million.

Commenting in its latest automotive insight update, Autofocus, the company states that volatility remains, which could change the shape of the sector for years to come.

In its most likely scenario, registrations would increase by 6% on 2022 levels, but still 26% down on pre-pandemic levels.

In this instance, the sector would achieve 448,937 new registrations in Q1, a 7.5% increase on last year’s quarterly performance but still 32.4% down on pre-pandemic levels.

Figures from the Society of Motor Manufacturers and Traders (SMMT) show that new car sales were up by 14.7% in January.

Philip Nothard, insight and strategy director at Cox Automotive, said: “Last year was challenging for the new car sector, yet we began 2023 with a welcome, albeit small, feeling of positivity. There were signs in the closing months of last year that manufacturers were increasing supply levels, reducing market volatility, with added reports of tactical registration activity and increased activity in the leasing sector; we have signs of a ‘normal’ car market.”

If new vehicle production recovers more quickly than anticipated, consumer and business confidence improve and a resolution is reached in Ukraine, the sector could achieve 1,904,024 new car registrations, 18% higher than 2022, but still down 17.6% on pre-pandemic levels.

Cox Automotive’s downside scenario predicts a reduction in fortunes with worsening complications caused by the ongoing conflict in Ukraine, failed government incentives to slow inflation, and further interest rate rises to put additional pressure on consumer spending. As a result, the company’s downside figure for the full year is 1,614,352 new car registrations, the same number recorded in 2022 but still 30.2% down compared to the nine years prior to 2020.

The company also states that EV prices and infrastructure remain a concern for the automotive sector this year.

Nothard explained: “As we edge closer to the Zero Emission Vehicle Mandate regulation, more needs to be done for EVs to truly become the dominant mode of transport. Significant investment is still needed in the charging infrastructure to support a growing EV parc. In addition, there are still barriers to entry for many people, with the cost of EVs being higher than their petrol/diesel counterparts.”

Reflecting on Volvo’s recent postponement of its agency model launch for three months, Cox Automotive expects several other OEMs to hold back and observe competitors before choosing a similar route. Nothard believes there are both pros and cons to such a model.

“An area of caution around the agency model is its pressure on cash generation, working capital and market volatility, all exposures currently managed by retailers. It could prove advantageous for those OEMs not entering immediately. However, even in countries such as Australia, where many manufacturers felt compelled to transition their dealer network to the agency model due to the supply disruptions resulting from the pandemic, it remains unclear what the impact is on both volume and profitability.”

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