Car demand is still stalling, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).
It said UK new car registrations dropped 8.5 per cent in May, with buyers holding back ahead of the upcoming General Election. Some 186,265 cars were registered last month, as business purchases drove the market, offsetting declines among private and fleet buyers.
Diesel in particular took a hammering, dropping by a fifth as its market share dropped from 50 per cent last year to 43.7 per cent.
Pantheon Macroeconomics chief UK economist Samuel Tombs said the weakness wasn't just to do with tax changes, with a surge in March as buyers sought to get purchases in ahead of vehicle excise duty changes.
"This tax rise encouraged many people to undertake car purchases in March, when registrations rose 4.4 per cent year-over-year," said Tombs. "Still, year-to-date registrations are down 4.2 per cent year-over-year, signalling a fundamental decline in new car demand. Demand is weakening because consumer confidence has fallen and real wages now are declining, making households reluctant to commit to big ticket purchases."
Alternatively fuelled vehicles (AFVs) did spark a resurgence, after a fall in April, up 46.7 per cent, giving them a new record market share of 4.4 per cent. More than 8,000 AFVs were registered in the month and nearly 50,000 have hit Britain's roads so far this year.
The SMMT said sales in the year to date have dropped by 0.6 per cent as the market stabilises, but said more than 1.1m new cars have been registered in Britain since January.
Mike Hawes, SMMT's chief executive, said,
We expected demand in the new car market to remain negative in May due to the pull-forward to March – which was an all-time record month – resulting from vehicle excise duty reform.
Added to this, the General Election was always likely to give many pause for thought and affect purchasing patterns in the short term.
Although demand has fallen, it’s important to remember that the market remains at a very high level.
John Leech, head of automotive at KPMG UK, expects "a steady cooling of sales over the rest of the year" and in 2018.
"UK consumer confidence for major purchases has been declining throughout 2017, as measured by GfK Nielsen, and the adverse changes to vehicle excise duty applied in April 2017 are expected to dampen demand throughout the second quarter of 2017," Leech said.
Car manufacturers have switched their attention from the UK market to Europe in response to the sterling’s weakness and stronger consumer demand in the EU. German car sales were up 13 per cent and French car sales were up eight per cent.