Looking ahead: Our forecasts for 2025
The last year has been anything but straightforward for the UK car market. We’ve seen the goalposts on EVs shift as the 2030 deadline is reinstated, new entrants cementing their place in the market, a new budget and a change in finance rules.
But despite these complexities, the market in 2024 was relatively healthy, with used car transactions up 5% year-on-year and new car registrations up 3.3% (as of October 2024). We’ve also seen visits to our platform rise to an average of 83 million a month, up 8% year-on-year.
But can we expect more of the same in the year ahead or will growing complexities in the market prove a challenge to growth? Read on to find out.
New car sales to rise, but push activity is still needed
Whilst 2024 has seen new car transactions rise, fleet sales have driven this increase with just 740,000 new car retail sales set to be recorded in 2024, making 2024 the weakest year for retail sales on record.
Prices and the overall economic outlook are the key factors in the slowdown of retail sales. Prices for new cars have soared since 2018, and not just as an overall market average. Mainstream models such as the Vauxhall Corsa and Nissan Qashqai have seen their sticker prices rise by 72% and 51% respectively. The switch to EVs is also a factor, with manufacturers pushing new EVs to the market to meet ZEV targets. New EVs still have a price premium over their ICE (internal combustion engine) counterparts, costing on average 27% more. Whilst this difference is an improvement on previous years, it is still a significant premium to pay which has deterred retail sales.
These price rises, combined with the pressures on household spending resulting from the spike in inflation and subsequent hike in interest rates, have made retail sales more of a challenge than ever with franchise retailers needing to continue the push activities they resumed in 2024.
Despite these challenges, we are optimistic for the year ahead. We expect lowering inflation and interest rates will ease pressure on households looking for their next car and push activities such as discounting will help to drive sales.
We therefore expect to see retail sales increase to circa 800,000, a rise of 8% year-on-year with the overall new car market expected to grow by 2%.
Brand loyalty is already fading as consumers switch to EVs
Whilst we anticipate a rise in new car transactions next year, these will be spread across more brands than ever before. Next year will see 62 brands vying for a share of the circa two million new car sales expected next year. This is significantly higher than the 45 brands that were in the market in 2019, a year that saw 2.3 million transactions.
This rise in the volume of brands is largely due to the journey to electric which has seen a flurry of new brands entering the market and starting to take a share of sales.
We do expect to see a rise in EV sales next year as manufacturers continue to push towards the 2023 deadline. The ZEV targets, as they currently stand, will mean that 28% of the manufacturer’s new vehicle sales must be electric to avoid fines. This is dependent on the outcome of the recently announced consultation.
The drive to electric will see 2024 mark a peak in the volume of petrol cars in the UK car parc, with its share beginning to soften from 2025 as electric supply continues to accelerate. Indeed, the number of EVs in the parc will reach 1.66m next year, which is a 33% increase on 2024.
A healthy but complex used market
The complexity and sourcing challenges of the last three years will remain as the full impact of the 3 million new cars not sold during the pandemic continues to flow through the parc, shifting from 1-3-year-old cars to the 3-5-year-old segment of the market, and beginning to impact 5-10. In 2019 there were circa 4.8 million 3-5-year-old cars in the parc. By the end of this year, it will fall -37% to just 3 million.
But despite these sourcing challenges, we expect the used car market to maintain the strong growth momentum of the last two years and rise from an estimated 7.61 million sales this year to around 7.70 million in 2025, a rise of 1.2%. This increase will mean the market will be within just 3% of pre-pandemic volumes and we expect that stock should continue to turn over at a similarly fast pace as seen in 2024.