Insight October 2020: Hybrid Cars Rising

by | Oct 18, 2020 | UK Car Valuations

The latest new vehicle registration data gives us an indication of the state of play up to the end of September 2020. Figures released by the Society of Motor Manufacturers and Traders (SMMT) show that, despite a fall of less than 5% in year-on-year registrations during September 2020, year-to-date new car registrations are down some 33%. It is not hard to spot the losers.

New diesel car registrations are down 56% over the year to date: 270,000 fewer diesel cars have been registered so far in 2020, with a total market share of 17%. Petrol car registrations are down 40%: some 485,000 units year-on-year, giving petrol a market share just shy of 60%. The big change – and no surprise – is that ‘alternative’ – i.e. part or full electric – drivetrain vehicles are rising.

So far in 2020, 314,655 hybrid and plug-in electric vehicles have been registered. This means that alternative drivetrains now outsell diesel roughly 3 to 2. The combined market share for part- and full-electric cars is now 25%.

Looking at new car registrations by brand shows the scale of the shift faced by some manufacturers. Of the forty vehicle manufacturers listed in the SMMT new car registration data, only four have seen a year-on-year fall in registrations of less than 20%. They are Bentley (down 17%), Lexus (down 12%), Porsche (down 13%) and Toyota (down 16%).

Volumes are obviously significantly different between these brands. Year to date, Bentley has registered just over 1,000 cars, while Porsche is higher at 8,653. Lexus steps up a bit with 11,341 cars YTD, but Toyota has registered 73,067 units in the UK this year. To lose just 16% of sales this year versus last, while other manufacturers lose up to 50% year-on-year shows that Toyota has got something right.

A recent press release gives some clue as to how Toyota has managed it. Cumulative sales data for the hybrid models in Toyota’s portfolio shows that sales of its hybrid models through 2020 are up on last year: 50,608 units this year compared to 48,359 unit in 2019. Toyota’s global hybrid sales now top 15 million units, with the UK accounting for 356,000 Toyota hybrid sales in an EU total of 2.8 million cars (approx. 12.7%).

This number is a bit of a surprise, as the UK is a bigger market in European terms, with a usual share of the EU and EFTA market circa 15%. One might surmise that the lower penetration of hybrid technology into UK car sales may be linked to company car taxation policy favouring diesel models, but it was a no-brainer for me to pick a Prius when I ordered my last company car some twelve years ago and that EV tax advantage has only increased since 2008. More likely is the UK’s fascination with premium brands and the slow adoption of hybrid alternatives offered by premium (mostly German) manufacturers encouraging a general mistrust of hybrid drivetrains. As we see from the latest data, that perception is now changing rapidly.

Looking at the diesel figures, one might be encouraged to announce the death of diesel drivetrains. Some commentators have written on the subject. It didn’t take a prophet to see that the Volkswagen emissions scandal would hurt diesel sales and that the numbers would fall. The dieselgate effect and the rise in support for EV drivetrains has helped to accelerate diesel’s decline, but as the new sales of diesel vehicles continue to fall and the used car market faces lower supply of diesel cars, prices will be some way supported. The theory that (used) diesel purchase is financial suicide does not add up quite yet.

As more manufacturers discontinue their diesel programmes and electric vehicles begin to arrive on the used car market in more volume, the cost to change from diesel (or petrol) to electric will become more attractive. The inevitable day when new and used sales of part- and full-EV drivetrains outnumber combined sales of solely combustion-powered cars will be a real turning point. Those manufacturers who have not invested in shifting from new sales of diesel and petrol cars to the used EV forecourt stocks of tomorrow may soon find themselves with little to offer used car buyers, in terms of used EV stock.

At present annual mileage, my current daily driver – a diesel Honda Civic Tourer – will be up for a change at the end of 2023, so it is interesting to play the motorway game of ‘what’s my next used car’? I quite like the idea of a BMW i3, which, at present prices, might cost something like £20,000 for a 3-year-old, 20k-mile example with range extender and a decent spec at an independent dealer. A Honda Jazz IMA hybrid to similar criteria is currently close to half that from a Honda franchised dealer. There are some advantages to an i3 when one factors in brand and residual value, but twice the price from one to the other? I’m not sure that my inner used car buyer will be £10k keen to go with the roundel when the time comes to change. In the meantime, I’ll keep playing the game.