New emissions rules trigger very large fall in new car sales

Sales of new cars are plummeting across Europe as the new WLTP emissions and economy test comes into force. Car-makers are struggling to get their ranges through the new test in good order, and bottlenecks are developing in the testing laboratories.

Meanwhile, some models have had to be removed from sale altogether because they cannot get through the updated test with a satisfactory score.

The Society of Motor Manufacturers and Traders (SMMT), the group that represents car-makers in the UK, has announced that new car sales in September fell by a substantial 20 per cent. In Germany, Europe's biggest car market, the fall was even more precipitous – 30.5 per cent fewer cars were sold.

The fall-off in sales has been exacerbated by the fact that many car-makers were frantically discounting models that do not comply with the new WLTP regulations, selling them off before the September deadline.

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Indeed, so widespread was this practice that BMW, one of the first car-makers to announce that its full range was WLTP compliant, issued a profits warning, saying that discounted sales from rival brands were undermining its own figures.

Volkswagen Group has been particularly hit. VW’s UK sales were down 55 per cent in September, and by 62 per cent in the same period in Germany.

Audi has seen similar falls in both markets. There is certainly a feeling that the VW Group as a whole has had more of a struggle getting its cars through the WLTP process than others.

In the Irish market VW’s situation is a little better, but not a lot. Overall Volkswagen is the best selling brand in the country for the year to date, but it saw a 33 per cent fall in sales in September, compared to a total market fall of 17 per cent.

Audi saw its sales fall by 43 per cent in Ireland last month, while Skoda – which has become a crucial brand in the Irish market for the VW Group – saw its sales here fall by 34 per cent.

Volkswagen is acknowledging the problem, and its difficulties in dealing with it. A spokesperson for Volkswagen Group Ireland, said: “Clearly the change over to WLTP won’t be without its challenges.

Huge pressure

"Volkswagen Group's CEO Mr Diess is on the record as saying recently, that the development teams of our brands have been under huge pressure, and that September and October will be tough at the manufacturer level, but that things should look up after that.

“From a Volkswagen perspective, the average CO2 increase between the old test and the new correlated test is on average two grammes, so this will have a pretty minor impact.

“The transition from NEDC to WLTP is in progress, but unlike other markets, the timing is very favourable for Ireland due to our number plate seasonality and January sales peak. A large portion of production for 2019 delivery starts from November, and Volkswagen are taking orders on 99 per cent of the sales mix covered.

“Any ‘production gaps’ are going to be mitigated by measures such as offering Tiguan Comfortline 2.0-litre TDI 150hp for the same price as the 2.0-litre TDI 115hp version.

"Audi is releasing 2019 model prices over the coming weeks. They will have a supply of the majority of our volume petrol and diesel engines, with customer offers available to bridge any production gaps. Audi is looking forward to 2019 with five new models launching in Ireland. Led by the new A6 and new Q8, Audi has already begun to take customer orders for 2019."

While stock management has apparently been “prudent and judicious” there are some WLTP bargains to be had, but it’s more that the incoming new model is more expensive, than that there is major discounting going on, according to one motor industry insider.

There are discounts out there, as deals are struck to get rid of unwanted stock, but there could be pain down the line as many dealers are reporting coming under pressure to pre-register and get rid of as much of the outgoing models as possible.

Self-register

According to Automotive Management Online, a survey of dealers in the UK found that 43 per cent said that they “had been placed under pressure to self-register vehicles ahead of September as a direct result of the switch to WLTP”.

Mike Hawes, the chairman of the SMMT, says the fall-off in sales is indicative of a legislative regime that is putting too much pressure on car-makers.

"With the industry given barely a year to reapprove the entire European model line-up, it's no surprise that we've seen bottlenecks and a squeeze on supply. These are exceptional circumstances with similar declines seen in other major European markets" Hawes told The Guardian.

“The good news is that, as backlogs ease, consumers and businesses can look forward to a raft of exciting high-tech cars and a market keen to recover lost momentum.”

It’s not just the WLTP figures, though. Brexit seems to be weighing ever heavier on the mind, not just for the motor industry which has to make decisions over UK-based factories, investment, and employment, but also for those buying cars and worrying about getting into long-term financial agreements.

Alex Buttle, director of car buying comparison website Motorway.co.uk told The Irish Times: "Brexit will start to weigh much heavier on the shoulders of the car industry over the coming months, particularly if a deal isn't thrashed out with the EU. And either way, we don't really know how consumers are going to react. These figures will send shock waves through the industry. Across the board, bar electrics and hybrids, sales are down more than a fifth on last year's figures.

Regulatory changes

"Even taking into account regulatory changes and more registrations bumped forward to August as car-makers rushed to register vehicles in bulk to beat the new European emissions testing deadline, a 20 per cent drop on last year's numbers is astonishing. We have come to expect diesel sales to fall dramatically every month, so there are no surprises there, but petrol sales floundered in September and more concerning is the drop off in electric and hybrid registrations."

Falling new car sales in the UK could also mean further pain for Irish dealers and importers. If stock across the water has to be sold off cheap then a great deal of it will make its way here, potentially driving up the level of cheap imported cars being brought in.

According to figures from Motorcheck, up to October 3rd, 79,096 cars had been imported into the State so far this year. Some 8,529 second hand cars were imported in September, a fall of 2.24 per cent compared to the same month last year.