As reported by the BBC, the Society of Motor Manufacturers and Traders (SMMT) has revealed that record numbers of new car registrations occurred last month, in turn making it the 43rd consecutive month of growth in the new car market.

SMMT’s chief executive Mike Hawes has added his take to the situation by specifying: “September is traditionally one of the year’s biggest months for new car registrations, and last month set an autumn record.”

However, questions have been raised as to whether this sustained boom in the industry is setting itself up for implosion due to an unbalanced number of new registrations that will end up with no end customer.

Audi UK’s Director Andre Konsbruck addressed the matter at the Frankfurt Motor Show last month when he stated: "We’re already starting to see an impact on residual values of used cars, the new car offers are so attractive that used cars are suffering, and in order to hit these ambitious targets we’re seeing a lot of self-registration in the marketplace, which is damaging margins on both sides.”

Konsbruck went on to stress his concern that the UK had been attracting new buyers through low interest rates which will ultimately be unsustainable.

 

How September Boomed

SMMT are attributing seasonal trends and the release of the new 65-plate as reasons towards September’s sales success, with a host of new and enticing deals on the new plate drawing people in.

Yet, Hawes has clarified that he is expecting trends to level out in the coming months, with SMMT remaining unsure at this point what effect the Volkswagen emissions scandal may yet have on sales, and particularly Diesel sales, going forward.

Yet, the boom has already got people questioning the long term staying power of an industry potentially inflating beyond its means. With dealerships potentially being hit by an unnatural need to influx cars en masse- 43% occurring on the last day of the month- concerns are that they will quickly become unprofitable, damaging the industry.

Konsbruck concludes: “All these customers who bought a couple of years ago are coming to parity at an early stage now, but all this will change when values drop, which is inevitable, or interest rates go up.”

It will be a challenge over the course of the coming months to manage people’s expectations when it comes to the industry. Particularly with PCP (Personal Contract Purchase) options becoming a more viable and popular option for most, it will be important for dealers to avoid circumstances where they are losing money on two fronts:

1. Writing off numerous new registrations ultimately going to no owner.

2. Renewing PCP customers off of the back of sudden car valuation drops due to the rapid high demand of the industry.

For the BBC article reporting the record high, see here.