The number of new cars registered in the UK grew by around 17.9% last year, new figures show.
Some 1.9 million new cars were registered in 2023, according to data from the Society of Motor Manufacturers and Traders (SMMT).
Mike Hawes, chief executive of the SMMT, described the increase as “a very positive result”, particularly considering the “relatively negative economic backdrop”.
The rise from 2022 was driven entirely by businesses investing in large fleets (up 38.7% year-on-year), with demand from private consumers remaining stable at around 818,000 units.
Mr Hawes said the lack of growth in private registrations was “no surprise” amid increases in the cost of living and interest rates.
Despite the year-on-year rise, the overall new car market was 17.7% below pre-pandemic levels.
Mr Hawes said he did not believe demand for new cars would return to levels seen before the virus crisis, partly due to changing working patterns resulting in less commuting.
Uptake of battery electric new cars reached a record level last year with 315,000 units but their market share was down from 16.6% during the previous 12 months to 16.5%.
Volumes actually fell by 34.2% in the last month of 2023, but the SMMT attributed this to an “abnormal” December 2022 when many orders were fulfilled.
The SMMT called on the Government to halve VAT to 10% on new electric car purchases by private buyers for three years.
Such a move would stimulate demand by reducing price tags by around £4,000 on average, the organisation stated.
This would be roughly similar to tax incentives available for fleets purchasing new electric cars.
The policy would result in an estimated 250,000 additional battery electric new cars on the road over three years, the SMMT said.
Only one in 11 private consumers in the UK buying a new car last year chose a battery electric model.
Mr Hawes said the UK’s market share for those cars was “probably in the bottom half in Europe”, below nations such as France, Germany, Ireland and Portugal.
He attributed this to a lack of incentives in the UK.
A scheme enabling people buying new electric cars to claim grants of up to £1,500 each was scrapped in June 2022.
Mr Hawes said: “With vehicle supply challenges fading, the new car market is building back with the best year since the pandemic.
“Energised by fleet investment, particularly in the latest EVs (electric vehicles), the challenge for 2024 is to deliver a green recovery.
“Government has challenged the UK automotive sector with the world’s boldest transition timeline and is investing to ensure we are a major maker of electric vehicles.
“It must now help all drivers buy into this future, with consumer incentives that will make the UK the leading European market for ZEVs (zero-emission vehicles).”
Under the ZEV mandate, at least 22% of new cars sold by each manufacturer in the UK this year must be zero-emission, which generally means battery EVs.
The threshold will rise annually until it reaches 100% by 2035.
Manufacturers who fail to abide by the rule or make use of flexibilities – such as carrying over allowances from previous years – will be required to pay the Government £15,000 per polluting vehicle sold above the limits.
Mr Hawes predicted that the adaptability of the scheme in its first three years meant the majority of car makers would avoid penalties during that period.
The SMMT is forecasting that the number of new cars registered in the UK in 2024 will reach 1.97 million.
Industry minister Nusrat Ghani said: “These latest figures are a fantastic start to 2024 for our world-class automotive sector, in what promises to be a great year ahead for the UK car market building on the many investment wins delivered in 2023.
“We’re backing our car industry to succeed for the long-term, and it’s great to see such high confidence in UK automotive and the EV market, especially as we drive forward the transition to zero-emission vehicles.”
Ian Plummer, commercial director at online vehicle marketplace Auto Trader, said: “Overall growth in the volume of electric vehicles hitting UK roads in 2024 is incredibly positive news.
“With the ZEV mandate now fully in force, the UK automotive industry is facing pressure from both Government targets as well as new brands who are dominating in the electric space – see (Chinese company) BYD taking top spot in global sales last year.
“Combined, these forces will result in price – currently the biggest barrier to purchase – being used to stimulate flagging retail demand and this year will likely be a good year for those considering switching.”
Alex Buttle, co-founder of used car marketplace Motorway.co.uk, said: “Overall, 2023 was a super-strong year for the car industry with new car sales growing month on month, despite the challenging economic conditions.
“While this can be partly explained by the post-pandemic backlog of demand the industry was finally able to fulfil, fleet sales have also been a major contributor to this sustained growth – especially for EVs – with many businesses taking advantage of generous tax incentives.
“We are likely to see even more businesses choose electric this year thanks to these incentives. If the Government could offer similar incentives to private buyers, we will see EV sales surge further in 2024 too.”