New car sales soar by 11 per cent despite end of scrappage

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The Independent Online

New car sales rose last month, despite the end of the Government's scrappage scheme, but the motor trade is warning that sales could dip again before the end of the year.

Registrations of new vehicles saw their 12th successive month of improvement in June, though from a painfully low base during the depths of the recession last year, and still below what are widely thought of as normal levels.

The Society of Motor Manufacturers and Traders (SMMT) said new car registrations increased by 10.8 per cent last month, and by 20.4 per cent over the first half of this year, compared with the corresponding period in 2009. A bounceback in the fleet market of 25 per cent on last year's performance pushed the figures higher. Business sales were also up; but the private buyers – indicative of the state of consumer confidence – are not back in droves. Private demand is down, by 3.8 per cent on May, seasonally adjusted, following a 4.3 per cent fall in May.

Even though the general revival in fleet and business demand – inevitable after replacement vehicles were postponed as an economy measure – has taken up the slack, the end of the scrappage scheme has affected private consumers.

Some 195,226 cars were registered in June, the vast majority imports.

Paul Everitt, the SMMT's chief executive, said: "The new car market continued to perform above expectations in June, with fleet sector registrations up 25 per cent compared to this time last year. The results indicate a strengthening economic recovery.

"The industry still expects challenging economic conditions in the second half of the year and government action to improve access to credit for consumers and businesses will be important in sustaining the momentum of recovery."

However, adjusting for seasonality, the monthly increase is 2.5 per cent rather than 10.8 per cent, according to analysis by Barclays Capital. Only a tiny residual number of sales can be attributed to the scrappage scheme – some 0.7 per cent of the total, reflecting delays between orders placed before the scheme ended in March and delivery now.

Within June's registrations data, private registrations – that are most indicative of underlying consumer demand – were 2.5 per cent below the level in June last year, the first time in a year that the annual growth rate has turned negative. Barclays Capital said: "The Government's incentive scheme had a marked impact on private registrations, and we would not be surprised to see these decline markedly through the second half of this year. However, it looks as though fleet purchases could help to cushion the drop-off in private demand."

The Vauxhall Astra was the best-selling model in June, its first number one slot since February 2008. Ford's Fiesta had the highest registrations over the first half of 2010. The Nissan Qashqai was the best-selling diesel in June. With the exception of the mini city car and executive segments, growth was evident across the board.