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Car market continues to decline despite July rise in sales

An uptick in the number of new cars sold to private and fleet drivers in July was not enough to slow the longer-term decline in the market.
New car registration data - a proxy for sales - showed the overall market in July recorded a 1.2pc annual rise to 163,898.
However, on a year-to-date basis the figures collated by the Society of Motor Manufacturers and Traders (SMMT) showed a 5.5pc drop to 1,477,892 registrations in the first seven months of the year.
This is in line with the industry’s forecast for the year, which predicts about 2.4m cars will be sold in 2018.
Sales to private buyers edged up 0.1pc in July to 67,772, while fleet sales - which include rental companies - were 2.6pc stronger at 91,542. The smaller company car market fell 10.2 pc to 4,584.
The long-term decline has been partly driven by motorists shying away from diesel vehicles in the wake of the Volkswagen scandal, which first broke in late 2015.
Diesel had about half of the UK market then but demand for vehicles powered by the fuel has since plunged.
Ministers are trying to discourage people from buying diesel cars, saying they are more polluting than petrol - something the industry disputes.
Car market continues to decline despite July rise in sales

Car sales are on a long-term downward trend

Credit:
Getty
Motorists have held off buying replacement vehicles, fearing they could be hit with new punitive taxes on the fuel.
As a consequence, in the year to date, diesel made up just 32.5pc of the total market, with sales falling 24.4pc in a year.
Petrol has taken up most of the slack, rising to 61.8pc market share, but environmentally-friendly Alternatively Fuelled Vehicles (AFVs) cars, such as hybrid and electric vehicles, have been the biggest beneficiary.
Car market continues to decline despite July rise in sales

Electric cars have surged in the wake of the 'dieselgate' scandal 

Credit:
Getty
In the seven months to the end of July, their market share rose 23.8pc on an annual basis, representing 5.7pc of new vehicles registrations.
Last month the Government launched its “Road to Zero” policy, which aims to slash vehicle emissions by encouraging AFVs with the development of charging infrastructure. This builds on the announcement last summer that by 2040 sales of new petrol and diesel cars will be banned.
Alex Buttle, director of car-buying comparison website Motorway.co.uk said confidence in diesel had been “shattered”.
Car market continues to decline despite July rise in sales

Diesel's market share has collapsed over the past few years

Credit:
Reuters
He added: “There's only one direction diesel sales are going and that's downwards. This trend is beginning to feel irreversible.”
Economist Howard Archer at the EY ITEM Club said wider concerns about the country's financial health worries were also contributing to the sales declines, with earnings growth weakening in April and May, and consumer confidence dipping in July.
He added that last week’s interest rate rise of 0.25 points to 0.75pc by the Bank of England, while not enough to cause major rises in the cost of cars bought on credit, could cause consumers to reassess making major purchases.
Car market continues to decline despite July rise in sales

Bank of England Governor Mark Carney has highlighted lending for cars as an area the central bank is watching 

Credit:
Bloomberg
In March the Bank of England warned lenders to tighten credit checks, saying even “the slightest sign of rough weather” in the economy could put a “significant” number of households in distress.
“The Bank wants to see the same in the car industry,” Mr Archer said. “Last year they highlighted car credit as an area they are watching.
“The rate rise - while not significant - could get people thinking about the potential for more hikes that could make borrowing more expensive.”
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