New car sales fall to 30-year low as parts shortages hit production

New car registrations fell to their lowest level since 1992 last year as supply chain issues left the market struggling.

Registrations in December were up 18%, continuing a slow increase over the previous four months, however, the overall picture for the year was the worst in three decades.

The Society of Motor Manufacturers and Traders (SMMT), which released the figures, said that around 1.61 million new cars were registered in 2022. That is down 2% on the 1.65m registered in 2021 and a quarter down on pre-pandemic levels.

It blamed manufacturing problems for the decline, saying car makers were unable to keep up with demand due to supply chain issues, such as semiconductor shortages, driven by coronavirus lockdowns in China.

While overall registrations were down on previous years, electric vehicles continued their rapid rise in popularity, with manufacturers prioritising the zero-emissions vehicles. With a 16.6% share of the market, they overtook diesel for the first time to become the second most popular powertrain behind petrol.

Mike Hawes, SMMT chief executive, said 2022 was “a very difficult year” for the car industry but there were signs that supply problems are “beginning to ease”. The SMMT predicts that new car registrations will increase by around 15% this year.

Hawes commented: “Manufacturers have really struggled to be able to make the vehicles in sufficient quantities, primarily due to semiconductor shortages but there are other parts shortages behind that as well. Lockdowns in China have not helped, high logistics costs, more pressure on raw materials.

“The complexities of global manufacturing have really been brought to bear heavily on the industry this past year.”

He went on: “The automotive market remains adrift of its pre-pandemic performance but could well buck wider economic trends by delivering significant growth in 2023.

“To secure that growth – which is increasingly zero emission growth – government must help all drivers go electric and compel others to invest more rapidly in nationwide charging infrastructure.”

Lisa Watson, director of sales at Close Brothers Motor Finance, said that while the overall figures were still behind pre-pandemic levels, December’s improvement offered signs of “significant” growth in 2023 and an easing of pressure on the used car market.

She commented: “The problematic gap between consumer demand and manufacturing rates experienced over recent years is gradually becoming narrower. Looking forward into 2023, vehicle suppliers should be better equipped to manage disruption and resource issues, which will help to alleviate the existing backlog of orders.

“Recent growth should also help to cool the record high prices of second-hand cars, with recent Autotrader data showing that the average price of a used car has increased by £3,300 over two years.”

Jim Holder, editorial director of What Car?, said electric car sales were the success story of the year but warned that the current financial climate could cause problems. He said:  “The challenge for 2023 is maintaining that growth as the energy and cost of living crisis continues. What Car?’s own research has shown rising energy prices have put off a third of potential buyers from choosing electric, and with manufacturers investing heavily into more electric models, they cannot be left alone to help consumers make the switch.

“Our research in October showed the energy price cap helped a fifth of EV buyers decide to go electric, knowing their tariffs were protected. Support for the sector and electric vehicles in particular will be vital in 2023 to help the industry reach pre-pandemic levels.”