New car demand falls as incomes come under pressure

Registrations in quarter two were down 2.5%, slightly steeper than the 0.7% decline recorded over the first quarter. June typically accounts for 9.0% of the annual market and volumes in 2008 were 4.0% off the 1999-2007 average for the month with 217,966 units. Overall year-to-date figures show a 1.6% fall to 1,247,479 units The Society of Motor Manufacturers and Traders (SMMT) which compiles the figures says the market had been performing better than expected, but declines in May and June had brought volumes back in line with its expectations. SMMT said that at present, concerns were that GDP growth would slow rapidly in the second half of the year and settle at around 1.5% in 2009. Consumer spending had been bolstered by a cut in the savings ratio, but how long it could withstand rising cost pressures remained to be seen. “We are now seeing concerns about rising fuel bills and household costs dampening consumer confidence, leading to slower demand for new cars. This slow-down is not unexpected, but signals an increasingly tough retail environment,” said SMMT chief executive Paul Everitt. “Cost pressures, environmental concerns and technological advances have ensured consumers have taken the choice of buying more efficient vehicles, and record numbers of cars are now in the lowest CO2 VED bands. The share of cars in the A band has increased more than tenfold in the past year.” Commenting on the figures, Keith Parry, head of motor trade at Barclays Commercial Bank said the decline in new car demand chimed with reports from car manufacturers that consumers were putting off the purchase of a new car as disposable incomes come under pressure. He went on: “Those that are buying are showing an increased interest in small cars that are diesel fuelled as consumers focus on fuel efficiency and value for money. Brands that have already focused on this market will benefit from this growing trend. Prospects for the second half of the year are looking challenging, but those that have already developed better fuel efficient models and established their green credentials will be in a strong position.” Vauxhall took the top two slots of the best sellers’ list in June for the first time since February 2000. The Corsa (pictured) was the best selling model for the first time since September 2004, although Ford’s Focus remained the best seller over the first six months of 2008. In fifth position BMW’s 3 Series recorded its best placing of the year. BMW has seen the largest volume rise of 2008. Kia, Nissan, smart and Volvo are among others also recording strong gains. Although the overall market has fallen, diesel registrations continued to improve. Diesel is now noticeably more expensive than petrol at the pumps, but better fuel efficiency and lower tax rates (due to lower CO2 emissions) has sustained growing demand. The BMW 3 Series was June’s top selling diesel. Demand for alternatively fuelled vehicles (AFV) declined for a second successive month in June, down 6.7% to 1,444 units.