Can EU car sales motor on while the UK skids to a halt?

Author Will Collins, Recycled Polymers Editor

The auto industry’s importance to the polypropylene (PP) market is growing all the time in Europe.

The auto industry’s importance to the polypropylene (PP) market is growing all the time in Europe.

When announcing a study into adding the equivalent of a new PP plant in Europe, Borealis noted that growing demand for PP from car manufacturers will be a driver for new capacity investment down the road.

Plastics use in cars has grown considerably over the years and as electric cars become more prominent (over 166,000 plug-in and hybrid electric cars were registered in the EU in the third quarter, 58pc more than in the third quarter of 2016) manufacturers are more likely to turn to plastic to save weight.

Add in a 3.9pc year-on-year increase in total new car registrations in Europe this year so far, including growth in 24 of the 27 countries surveyed, and you can see why PP producers believe that the industry has turned a corner. (It’s been a Goodyear).

But the identity of one of those three backmarker countries presents a slight cloud on the horizon.

The UK is the second largest European car market, close behind perennial rival Germany (which will no doubt be more interested in beating the Dutch) but sales have dropped away considerably this year.

Over the first 10 months of the year, UK new car sales are down by 4.6pc — a difference of more than 106,000 cars — and the decline has accelerated. If you narrow the timeframe to July onwards, this becomes a 9.6pc decrease.

A number of explanations have been offered for the industry hitting the brakes, most of which boil down to lower consumer confidence. There is a very close historical correlation between consumer confidence and car registration figures, and a number of factors have been posited as potential influencers of UK consumer confidence in recent months.

One of them is Brexit, naturally, and buyers eschewing big-ticket purchases while uncertainty remains over the timeline, nature and economic impact of the UK’s separation from the EU. It may be no coincidence that Ireland, the UK’s closest neighbour, is one of the other two countries to suffer a decrease this year so far, and UK car manufacturing has also suffered.

Consumer uncertainty is also blamed for a drop in diesel car sales following recent emissions scandals, with Society of Motor Manufacturers and Traders (SMMT) head Mike Hawes saying that the government needs to reassure customers that the latest, low emissions diesel cars will not face any bans. With the possibility of £50/day charges to park a diesel car in central London, quite a dollop of reassurance might be needed.

It is also possible that buyers are being put off entering one of the personal contract purchase (PCP) agreements – which have become increasingly ubiquitous in the industry – by bubbling concerns about rising personal debt.

So far the UK decline has been a blip, but not a disaster, for the total European industry. The other “big five” markets, Germany, France, Italy and Spain, have all increased by at least 2pc this year, and European PP manufacturers will be confident that higher per-car use of PP will cushion any potential decline in unit numbers.

But to put the UK’s 106,000 decrease this year into context, Finland has only registered 100,842 cars this year, Hungary 93,025, and eleven other EU countries even fewer. A slide in sales in such an important market will be cause for concern.