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Motor industry blames government as diesel slump hits car sales again
New car registrations have plunged again after a further collapse in the sale of diesel vehicles that is being widely blamed on the government.
Sales are down more than 11 per cent in November, a decline for the eighth month running. The industry has described the crash as a “major concern”.
Last year a record 2.7 million new cars were sold in Britain. This year that figure is on course to fall by more than 5 per cent, a decline of more than 11,000 cars a month and one likely to take it below 2015 levels of 2.6 million.
In November, registrations of new cars fell 11.2 per cent to 163,541. Sales to fleet owners of more than 25 company cars or cars for rent fell by 14.4 per cent. Fleet sales traditionally make up more than half of new car sales. Sales to private owners, which usually make up a little under half of all sales, were down 5.1 per cent. Cars sold to smaller businesses, which account for less than 5 per cent, collapsed by a third.
The cause is a 30.6 per cent slide in the sale of new diesel cars. The industry was sharply critical yesterday of the latest tax raid on the sale of new diesel cars in the chancellor’s budget, even though new diesel engines are regarded as some of the cleanest, greenest vehicles coming on to the market.
Sales of new cars are often seen as a sign of consumer confidence because they are most households’ second largest financial commitment after their home, even if, as with mortgages, most cars are sold on finance, typically on three-year deals. The average price of a new car in Britain is £15,000.
Diesel cars traditionally have made up about half of all sales. They are favoured by high-mileage drivers because of their relative fuel efficiency compared with petrol cars, meaning that they are cheaper to run.
The latest slump has frustrated retailers and manufacturers because of what Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, called the “ongoing anti-diesel messages from government”.
The decision by Philip Hammond to increase tax on new diesels by £500 from April has further irritated the industry. “Diesel remains the right choice for many drivers, not least because of its fuel economy and lower CO2 emissions,” Mr Hawes said.
“The decision to tax the latest low-emission diesels is a step backwards and will only discourage drivers from trading in older, more polluting cars. Given that fleet renewal is the fastest way to improve air quality, penalising the latest, cleanest diesels is counterproductive and will have detrimental environmental and economic consequences.”
He said that falling business and consumer confidence were also worrying: “An eighth month of decline in the new car market is a major concern.”
Car dealers continued to be perplexed by what they called the government’s “demonisation of diesel”.
Sue Robinson, head of the National Franchised Dealers Association, said: “The recently announced tax increase on all new diesel cars affects the cleanest Euro 6 [the new emissions standard] which in many cases still represents the most efficient and affordable vehicle.
“By failing to increase vehicle excise duty on older diesel cars, government is sending a confusing message to consumers that they should not buy a new diesel but rather stay in their old cars or buy a second-hand, dirtier diesel car.”
Sales of hybrid electrics, plug-in hybrids and pure electrics rose 33 per cent in November, accounting for 5.4 per cent of the market.
UK car sales fall for 8th month running
SMMT chief executive, Mike Hawes, said: “An eighth month of decline in the new car market is a major concern, with falling business and consumer confidence exacerbated by ongoing anti-diesel messages from government. Diesel remains the right choice for many drivers, not least because of its fuel economy and lower CO2 emissions. The decision to tax the latest low emission diesels is a step backwards and will only discourage drivers from trading in their older, more polluting cars. Given fleet renewal is the fastest way to improve air quality, penalising the latest, cleanest diesels is counterproductive and will have detrimental environmental and economic consequences.”
Commenting on the latest registration figures, NFDA director Sue Robinson blamed confusion surrounding diesel-powered vehicles for the decline in sales during November, stating that diesel cars had shown a consistent decline “as a consequence of recent media coverage and government’s announcements”.
Robinson added: “The recently announced increase in tax on first registration of all new diesel cars affects the cleanest Euro 6, which in many cases still represent the most efficient and affordable vehicle. By failing to increase VED on older diesel cars, government is sending a confusing message to consumers that they should not buy a new diesel, but rather stay in their old cars or buy a second hand, dirtier diesel car.
“Positively, the resilience shown by the used car market continues to partially offset the decrease in new car registrations with many consumers considering second-hand cars as the most viable option for them.
“We expect the new car market to continue to perform in-line with these results in the last month of the year.”
Richard Jones, managing director of Black Horse, acknowledged that many factors were at play in the declining market. He said: “These figures show the new car market continues a trend of moving to a more sustainable position. This further correction in sales will be beneficial for the market in the long term and runs counter to recent concerns of the influence of a potential oversupply of vehicles on used car values.
“There are a number of factors contributing to these numbers, not least the falling consumer and business confidence we saw in November, the adverse impact of exchange rates on UK car prices, along with the record levels of sales we’ve witnessed in recent times.
“We should expect to see the market continue to contract into the first half of 2018, and then level off. We also expect the used car market will continue to perform well as it has done through 2017.
“It’s also interesting to note a further fall in diesel sales, as newer diesel vehicles are the right choice of fuel for many drivers, particularly those driving larger vehicles or averaging long journey times. Whilst we continue to play our part in helping people buy electric vehicles, their current market development indicates an evolution rather than revolution.”
[…] Auto Trader’s chief operating officer, Nathan Coe, added: “2017 has been a challenging year for the new car market, with Brexit continuing to cast a shadow over consumer confidence, exchange rates impacting the profitability of UK new car sales and the effect of the ongoing demonisation of diesel only serving to confuse consumers and hamper production plans for manufacturers.
|Further trade coverage|
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||New Car Market Continues to Decline|
||Diesel slump continues to drag down new car sales|
||UK car sales fall for 8th month running|
||NFDA Comments on car market demand|
||LCV registrations down 11 per cent in November|
“However, whilst the new car market is slowing, there remains great opportunity within the used car market.”