U.K. Car Market Falls 6.1% in June, Ford Focus Tumbles from Top Spot

Registrations of passenger cars sank by 6.1% in the United Kingdom last month compared with the previous year, according to data from the U.K. trade body for the automotive industry, the SMMT. In June 2008, 209,190 new cars were registered compared with 222,863 new cars in June 2007. That is the most dramatic year-on-year (y/y) fall seen so far in 2008 in this market, which is traditionally one of the most active and cut-throat in Western Europe.

So far in 2008, new passenger car registrations in the United Kingdom have fallen compared to the previous year in four out of six months, managing just two months of growth in March and April. That means that year-to-date (YTD) registrations are now 1.6% below the previous year's level at 1,247,479 units.

Vauxhall managed to outsell Ford during the month, shifting over 32,000 units in June, which is a 3.3% drop on the previous year. Ford sold just less than 28,700 units, a 3.6% drop on June 2007. The two arch-rivals continue to battle it out for the title of the United Kingdom's favourite brand. So far this year, both brands have topped the best-selling brands list for three months each, although the fact that Ford substantially outsold Vauxhall (by more than 10,000 units) in the all-important March market, means that Ford is well ahead of Vauxhall on a YTD basis. This is important for Ford as Focus sales wobble (see below) and Fiesta and Ka volumes both wane ahead of the launch of the all-new versions of both of those high-volume models towards the end of this year. However, it cannot be denied that Vauxhall has been hugely successful in narrowing the gap in market share between itself and Ford over the last two to three years, thanks both to some of improved model offerings and its highly aggressive sales strategy.

Unusually, Ford was also outsold by Vauxhall in terms of sales of certain individual models. In fact, the Ford Focus, which has enjoyed an uninterrupted reign as the country's best-selling car for the last seven years, on a full-year basis slipped from first place to fourth place in the rankings during the month. This allowed Vauxhall the rare opportunity to claim the number one and two spots for its Corsa and Astra cars, respectively.

There could be several reasons behind the Focus's sales slump in June. Firstly, the facelifted Focus arrived in U.K. dealerships just a few months ago and it is likely that these new models are still trickling through to showrooms, interspersed with the "old" model. It may not be until later in the year until the positive sales effects from the facelifted Focus are really felt. Secondly, Ford is also still ramping up supply of all of its ECOnetic low-emission variants, particularly of the facelifted Focus. With ECOnetic models expected to be particularly popular with fleet buyers, where the CO2 incentive is even stronger than it is for private buyers in the United Kingdom, this could be slowing down Focus sales, until deliveries of enough Focus ECOnetics are made. It should also be noted, however, the model sales comparison is usually made on a range basis, meaning that the Focus range (which incorporates the standard Focus hatchback and estate models, as well as the C-Max multi-purpose vehicle (MPV) and the coupé-cabriolet version) is compared with the Astra range, whereas this month the comparison has been carried out on an individual model basis.

Outlook and Implications

The sizeable drop in June demand really comes as little surprise when considering the unfavourable economic backdrop in the United Kingdom right now. Inflation is still rising at a worrying rate, primarily because of surging fuel, energy and food prices as well as the weakness of the pound. For the full year 2008, inflation is on course to be more than double the Bank of England's target inflation rate of 2.0%, at around 4.6%. This is reinforcing concerns that the Bank of England will make the decision to raise interest rates from 5.00 to 5.25% at a time when consumers can ill-afford it. The weakening housing market and the credit squeeze are also contributing to slowing consumer spending, and all of these factors combined signal that the risk of recession is rising rapidly.

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