Registrations of passenger cars have declined, falling by 1.3% in the first half of the year, according to the Society of Motor Manufacturers and Traders (SMMT).
A total of 1.42m passenger cars were registered in the six months to June 2017, down from 1.4m over the same period in 2016.
The decline of diesel was the major contributing factor, with registrations falling by 9.9% year-on-year to 680,668 units in the first half of the year, even as petrol and alternative fuel vehicle (AFV) sales increased in the same period.
Petrol registrations increased by 5.2% in the six months to June 2017, and AFV sales rose by 27.5% reaching 4.2% market share over the same period.
Private registrations declined by 4.8% in the first half of this year, while fleet sales increased by 1.5%, and business registrations by 2.7%. The Ford Fiesta was the best-selling vehicle in the year to date, selling 59,380 units.
The registrations by fuel type followed the same pattern as the first half of 2017 in June’s results. Overall, registrations in June fell by 4.8% year-on-year to 255,766 units. Diesel registrations fell by 14.7% year-on-year in June, while both petrol cars and AFVs recorded rises, achieving year-on-year increases of 2.5% and 29% respectively over the same period.
All sectors experienced registration falls in June, with business registrations declining the most, falling by 8.3% year-on-year. Private and fleet cars recorded registration falls of 7.8% and 2.4% respectively in June compared to June 2016.
Mike Hawes, chief executive of the SMMT, 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.
“It’s encouraging to see alternatively fuelled vehicles experiencing rapid growth but adoption is still at a relatively low level and more long term incentives are required if this new generation of vehicles is to be a more common sight on British roads.”
Chris Bosworth, director of strategy at Close Brothers Motor Finance, attributed the fall in passenger registrations to rising inflation and Brexit.
He said: “With inflation hitting its highest level in four years and no real term increase in wages, it’s perhaps unsurprising that car buyers have decided to take stock and hold off on 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.”
Sue Robinson, director of the NFDA, said confusion over different diesel emission standards was to blame for the fuel type’s continually declining popularity.
She said: “The decrease in diesel registrations shows that there is some confusion surrounding diesel. Modern Euro 6 diesel cars should not be compared to older diesel vehicles.
“It is encouraging to see that more consumers seem to be shifting towards alternative fuel vehicles, which retain a record market share.”
Graham Hill, vehicle finance director at the National Association of Commercial Finance Brokers (NACFB), blamed changes to vehicle excise duty (VED) and falling consumer confidence for continuing falls in registrations.
However, he argued that the car market had performed well in the circumstances, which he attributed to the rise in car finance.
He said: “Set against the wider backdrop, the new car market is still in rude health – after all, the first half of the year was the second biggest on record. A large proportion of this success has to be attributed to the uptick in car finance, which accounted for around 86% of new car sales last year.
“Manufacturers looking for stronger sales in the second half of the year will turn to providing larger discounts and bonuses to make car finance deals look more attractive. They have the ability to do so as new car prices in the UK are the highest in Europe, providing plenty of wriggle room.”
Hill added that FCA and press attention around personal contract purchase (PCPs) had begun to lower consumer confidence in the product.
He added: “As the FCA continues to look into the lack of transparency around the selling of certain car finance deals, the sabre-rattling around the actual finance products themselves needs to soften.
“It already looks like the adverse publicity surrounding Personal Contract Purchases in particular has knocked consumer confidence in the product. Carry on like this and we risk driving away consumers and talking the market into an early grave.”