UK car sales hit the brakes and fall for the third month in a row

Rebecca Smith
Not quite revving up at the moment
Not quite revving up at the moment (Source: Getty)

The UK car market has fallen back on early year highs as sales dropped for the third month in a row in June.

According to the Society of Motor Manufacturers and Traders (SMMT), the UK new car market declined 4.8 per cent last month, with 243,454 units registered.

Registrations did fall at a slower pace than in the previous two months, which the SMMT said reflected demand stabilising after the bumper first quarter and “subsequent market turbulence” caused by the chances to vehicle excise duty (VED).

Read more: All five of the big EU car markets rev up growth for May – except the UK

There was some positive news for alternatively fuelled vehicles (AFVs), which held an all-time high market share of 4.4 per cent for the second month. Some 10,721 AFVs hit the roads in June, up 29 per cent on last year. SMMT boss Mike Hawes noted that adoption was still at a “relatively low level” though, and called for more long-term incentives “if this new generation of vehicles is to be a more common sight on British roads”.

Mike Hawes, SMMT’s chief executive, said:

As forecast, demand for new cars has started to cool following five consecutive years of solid growth but the numbers are still strong and the first half of the year is the second biggest on record.

Provided consumer and business confidence holds, we expect demand to remain at a similarly high level over the coming months.

(Source: SMMT)

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said sales might still have been depressed in June by the VED changes in April, increasing the cost of purchasing most new cars, with many opting to buy in March. “Even so, registrations in the first half of 2017 were down 4.8 per cent year-over-year, signalling an underlying decline in new car demand”.

He added:

We continue to think that car sales will continue to fall over the next six months as car manufacturers push through further price rises in response to sterling’s depreciation, lenders tighten access to unsecured credit and consumers’ real incomes remain squeezed by high inflation.

Meanwhile, Chris Bosworth, director of strategy at Close Brothers Motor Finance, pointed to inflation hitting "its highest level in four years and no real term increase in wages" as to why car buyers could be holding off of purchases.

"And there may be further market disruption afoot: with the Brexit negotiations in full swing, the UK has entered into a period of unchartered economic uncertainty, and we anticipate this will have a real impact on consumer spending habits in the months ahead," Bosworth added.

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