LONDON: Car sales tumbled in April at the sharpest rate since 2010 as government cuts to subsidies for green cars and a rise in prices hit the market for new vehicles. New car registrations fell month on month by almost 20% to 152,076 units as demand for electric and hybrid vehicles fell for the first time in almost four years. Analysts said the 19.8% fall was a huge blow to the industry and was mainly due to a cut in green subsidies that will add to the cost of owning a low-emission car.
Howard Archer, the chief economist at IHS Global Insight, warned that the incentive to bring forward purchases to March could mean that month proved to be the industry’s “last hurrah”. Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said an average 2.9% annual rise in prices could set the industry on a downward trend for the rest of the year. Car sales have underpinned the UK’s economic recovery since 2014 when fuel prices, which surged after the financial crash, dropped by more than half. Double-digit growth in subsequent years, further helped by cheap finance deals, has proved to be a significant element of GDP growth. Tombs added that consumers were finding it tougher to secure unsecured credit from lenders, “and the fall in consumer confidence and squeeze on real wages is making households reluctant to commit to big ticket purchases”.
Diesel cars were the biggest fallers, prompted by the continued threat of higher duties and potential bans from driving in city centres. Tombs said company fleet car buyers, who have propped up the market since the Brexit vote last year, continued to provide all the momentum behind the market while private car buying slumped. “Private car registrations plunged in April because vehicle excise duty (VED) rose sharply for cars purchased after April 1,” he said. Most buyers would have been about £400 better off over the three years by buying a low-emission car before the tax hike, although the exact savings vary according to the vehicle’s emissions and price. It meant that registrations rose 8.4% year-over-year in March to mark the busiest month of the year for car purchases, indicating that the tax change substantially influenced behaviour.
Under the new system lower-emission models, including hybrids and plug-in hybrids, will pay between £10 and £100 in first-year VED after previously being exempt. All low emission vehicles other than those with zero emissions will face a flat £140 annual charge in subsequent years. The Society for Motor Manufacturers and Traders, which collects the data, said the industry remained upbeat since the average for the first four months of the year still showed a 1.1% gain on last year to a record sales figure of 972,092. Sue Robinson, director of the National Franchised Dealers Association, said the slump was not a surprise. “April is always one of the weakest months for new retail but with record low interest rates and record high employment levels consumer demand remains high,” she said.
