UK car sales rose 10% in April but motor market is still in decline, SMMT warns

Demand was affected by a number of factors, including the timing of Easter, the trade body says

Sales of alternatively fuelled vehicles rose but still only claim a small share of the market (Reuters)

UK car sales rose more than 10 per cent last month compared to April 2017, mainly due to vehicle excise duty (VED) changes that came into force last year, but the motor market is still in decline, according to new figures.

The latest data from the Society of Motor Manufacturers and Traders (SMMT) showed 167,911 new units were registered in April, an annual increase of 10.4 per cent.

The trade body said: “Demand was affected by a number of factors, including the timing of Easter, which meant two additional selling days this April, and March’s adverse weather, which pushed some deliveries into April.

“Most significant, however, were the VED changes that came into force last April, causing a pull forward into March 2017 and a subsequent depressed April market.”

The VED changes, brought in by George Osborne in his 2015 Budget, split the duty into three bands, zero emissions, standard and premium, with the result that tax on diesel and petrol cars increased. Meanwhile, new rules targeted solely at diesel cars increased taxes again: if vehicles fail to meet emissions standards, owners could face tax bill hikes of up to £500 per year.

The dampening effect this had on sales was borne out when the SMMT’s figures were separated out according to fuel – demand for petrol cars went up 38.5 per cent last month, while diesel registrations fell 24.9 per cent.

Registrations for plug-in and hybrid electric cars rose 49.3 per cent, which the SMMT said was down to manufacturers investing in a growing choice of models. However, the SMMT added, alternatively fuelled vehicles still account for just 5.6 per cent of the market.

Meanwhile, the group highlighted that while April’s figures showed a significant rise, “the overall new car market remains down year to date”, with new registrations in the first four months falling by 8.8 per cent.

The SMMT said that while the decline is expected to slow over the rest of the year, “political and economic uncertainty will continue to affect the market and further instability could cause additional disruption”.

(SMMT (SMMT)

Ian Gilmartin, head of retail and wholesale at Barclays Corporate Banking, said: “The uptick in new car sales will be welcome news for many sellers, but we can’t have it both ways – just as we partly attributed last month’s poor result to an unfair comparison to an unusually strong March 2017 ahead of the tax changes, similarly April 2017 was relatively weaker after the VED increase came into force, which flatters today’s numbers.

“With the exception of last year, it is still the weakest April since 2013 but after a full year of declines, the industry will cheer a sales increase in whatever way it’s achieved. The figures also show that diesel sales continue to struggle with a 25 per cent fall, reinforcing the pressing need for policymakers to provide more clarity to car buyers, and indeed the industry itself, on future plans around fuel regulations.”