UK has solidified its No. 2 sales spot

France slipped to third in the late 1990s

Richard Feast
Automotive News Europe | February 20, 2006 06:01 CET

The UK has overtaken France in the past 10 years to become Europe’s second-largest market for new-car sales after Germany.

For the past five years annual UK new-car sales have averaged more than 2.5 million units.

During the previous five years UK new-car demand averaged 2.17 million units a year, according to UK market researcher JATO Dynamics.

The reason for the 16 percent increase is simple: lower prices.

Automakers cut new-car prices 10 percent in 2000 following an intense consumer campaign, which was supported by the country’s national dealers association.

The campaign highlighted the fact that cars in the UK then cost significantly more than in other European countries.

The price cut encouraged people to buy new cars, says Alan Pulham, who retired in 2005 after more than 15 years as director of the UK’s National Franchised Dealers Association.

“A market of 2.5 million would have been unthinkable in the late 1990s,” Pulham says.

Dealers could afford to cut prices because the UK government forced automakers to provide the same transaction prices to car dealers as they gave to fleet buyers, as long as the dealers bought similar volumes. One result was that dealers formed cooperatives to order cars from automakers.

Cars suddenly became more affordable at a time when the country’s economy was healthy, interest rates low, employment high and consumer confidence strong on account of rising property values.

The UK’s strong economy means there could be further market growth, says Garel Rhys, who retired as professor of motor industry economics at Cardiff Business School in Wales at the end of 2005.

Rhys says annual new-car sales in the UK could reach 3 million by the end of the decade.