UK car sales post increase for first time in 14 months

Consumers are being lured by cheap financing deals and extras such as three years' free servicing, while green issues have pushed them towards smaller cars

UK car sales rose for the first time in more than a year last month, as increasingly green and cost-conscious customers drove a surge in purchases of smaller vehicles – but experts warned the industry was in for a rough ride.

Click HERE to view graphic (76k jpg)

New car registrations increased by 7.3 per cent to 59,346 in August, compared with the year before, recording their first rise since June 2010, according to the Society of Motor Manufacturers (SMMT). The Ford Fiesta was the most popular model, followed by the Opel Corsa and the Ford Focus.

Sales in the so-called mini segment of cars – the smallest category of vehicle that includes the Vauxhall Agila and the Toyota IQ – jumped by 34.5 per cent last month. The "supermini" segment, the next size up, which includes the Ford Fiesta and the Fiat 500, sold 17.6 per cent more cars in the period.

Sales in August are traditionally much lower than the rest of the year, as consumers hold off on buying vehicles ahead of new registration plates in September. As a result, August typically accounts for about 3 per cent of annual sales, while the following month makes up about 17 per cent.

However, the SMMT's chief executive, Paul Everitt, said the August figures reflect underlying trends in the industry, with manufacturers and car dealerships "working really hard, doing everything they can to provide a good value proposition". Hard-up consumers are being lured by cheap financing deals and extras such as three years' free servicing, while green concerns, increasingly luxurious models, greater fuel efficiency and cheaper prices have pushed them towards smaller cars, Mr Everitt added.

Colin Couchman, a senior market analyst at IHS Automotive, said: "The centre of gravity in Britain was the 'C' segment, with the Focus firmly in the centre. But while the Focus is still a great selling car, things have shifted to the smaller 'B' segment [the supermini] like the Polo and Fiesta.

"A lot of this is down to the fact that the smaller cars are offering bigger comforts, such as satnavs and leather seats. And they use less petrol, are more environmentally friendly and have lower road tax, a lot of which is geared around CO2 emissions," he added.

Despite the continuing rise in smaller car sales, experts warned yesterday that the overall outlook for vehicle manufacturers was bleak, with weak demand in the UK and across much of the world.

"Given the downgrade in economic growth forecasts, the outlook for the new car market is set to remain challenging. Consumers are nervous about the future," Mr Everitt said.

Howard Archer, the chief UK and European economist at IHS Global Insight, said: "It is evident that many consumers are currently less willing or able to spend on big-ticket items so they are likely to think long and hard about splashing out on a new car."

The SMMT said total new car registrations fell by 6.1 per cent in the first eight months of the year, compared with the same period the year before, while it forecasts sales for the year to be 5 per cent lower at 1.93 million units.