• Sales of new cars in the U.K. plunged by 44.4% in March
  • Demand from private buyers and larger fleets dropped by 40.4% and 47.4%, respectively
  • SMMT now projects overall U.K. auto sales in 2020 will drop by 25% from 2019 data

Sales of new cars in the U.K. plunged by 44.4% in March as the coronavirus pandemic shut down auto plants in Britain and Europe and also closed showrooms.

Only 254,684 cars were sold in the U.K. in March, a two-decade low. The Society of Motor Manufacturers and Traders, or SMMT, said the decline was worse than what was experienced during the 2008-2009 financial crisis.

Demand from private buyers and larger fleets dropped by 40.4% and 47.4%, respectively, in March.

However, in a bright spot, sales of battery electric vehicles almost tripled to 11,694 units in March, representing 4.6% of the market, while sales of plug-in hybrids grew by 38%.

Still, SMMT now projects that overall U.K. auto sales in 2020 will amount to 1.73 million units, a 23% drop from previous expectations and a 25% plunge from 2019 figures.

“With the country locked down in crisis mode for a large part of March, this decline will come as no surprise,” said Mike Hawes, SMMT Chief Executive. “We should not, however, draw long-term conclusions from these figures other than this being a stark realization of what happens when economies grind to a halt.”

Hawes added: “How long the market remains stalled is uncertain, but it will reopen and the products will be there. In the meantime, we will continue to work with government to do all we can to ensure the thousands of people employed in this sector are ready for work and Britain gets back on the move.”

Auto sales were even worse in France and Spain, dropping 72% and 69%, respectively, in March. Italian sales plunged by 85%.

In Britain, Jaguar Land Rover, Toyota Motor Corp. (TM) and Nissan Motor (NSANY), among other automakers, have temporarily shut down production.

The Guardian reported that traditionally March has been one of the strongest months for U.K. auto sales due to the issuance of new license plates.

March accounted for almost 20% of total new car registrations in 2019.

JP Morgan warned that the second quarter may be even worse for the global auto industry – they project a 19% drop in production in Europe, the Americas and China.

Ian Henry, of the consultancy AutoAnalysis, estimated that each week of plant closures in Europe will cost the industry an additional $8.6 billion in lost production value.

When auto plants can reopen depend upon the logistics of international supply chains, he added, also noting that one cannot predict the mood of the consumer once the pandemic passes.

“What will be the state of consumer demand after this?” Henry said. “Will the man in the street want to buy a new car? A huge proportion of cars go to companies and fleet managers won’t be looking to buy cars for executives.”

Given the ongoing woes in the British and European auto markets, the European Automobile Manufacturers’ Association, or ACEA, has called for a far-reaching trade agreement between the U.K. and the continent that reflects the importance of their intertwined auto industries. Otherwise, ACEA warned, the industry would suffer damage and may also scuttle the development and roll-out of electric vehicles.

ACEA pointed out that in prior years, nearly 3 million motor vehicles valued at $58.3 billion were traded between the EU and the U.K., while the trade in automotive parts accounted for almost $15.1 billion (about 30,000 parts are used in the construction of a single car).

“With this interdependence in mind, it is essential that tariff-free trade and an open flow of goods and services are a cornerstone of the ongoing negotiations between the EU and the U.K.,” said ACEA’s Director General, Eric-Mark Huitema. “Any future trade agreement must therefore combine zero tariffs, workable rules of origin, simplified customs requirements and ensure the absence of technical barriers to trade.”

ACEA also called for special consideration to the trade in batteries for electric vehicles, since both EU and U.K. lack battery manufacturing capacity.

“Developing and deploying battery technologies is a fundamental challenge for the automotive industry, it is also key to Europe’s ambitious climate agenda,” added Huitema. “The rules of the future trade deal should not limit manufacturers’ ability to bring low- and zero-emission technologies to the market.”

Huitema further warned that the “clock is ticking for these complex negotiations, and we are very concerned that the time remaining under the transitional arrangement is insufficient, especially given the on-going COVID-19 crisis. Such an outcome would be catastrophic to the automotive sector, and to the European economy in general, and should be avoided at all reasonable cost.”