UK car industry hits the brakes as new registrations fall 11.2% in November

Britain's car market hit the brakes in November, as sales of new cars declined for the eight consecutive month.

According to data published by the Society of Motor Manufacturers and Traders (SMMT), the number of new car registrations fell 11.2% year-on-year to 163,541 last month, while business car registrations fell by over 33%.

The decline was mostly driven by a sharp drop in sales of new diesel cars, which fell 30.6% from the corresponding period 12 months earlier, largely because of the confusion and speculation about the Government's air quality plans and its policies towards diesel cars.

"An eighth month of decline in the new car market is a major concern, with falling business and consumer confidence exacerbated by ongoing anti-diesel messages from government," said Mike Hawes, chief executive of the SMMT.

"Diesel remains the right choice for many drivers, not least because of its fuel economy and lower CO2 emissions. The decision to tax the latest low emission diesels is a step backwards and will only discourage drivers from trading in their older, more polluting cars," he added.

"Given fleet renewal is the fastest way to improve air quality, penalising the latest, cleanest diesels is counterproductive and will have detrimental environmental and economic consequences."

The drop in sales of diesel cars offset an otherwise positive performance from other sectors, which saw sales of petrol cars and of Alternatively Fuelled Vehicles – the category that includes electric cars and hybrids – increase by 5% and 33.1% respectively.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, suggested car sales could rise 0.8% quarter-on-quarter in the final three months of the year, if they hold steady in December. However, that will not come close to matching the 11% rebound recorded in the third quarter, which contributed about 0.2 percentage points to quarter-on-quarter growth in households' overall spending.

Instead, Tombs warned the decline in car sales could continue well into 2018.

"The Chancellor dashed industry hopes of a taxpayer-funded diesel scrappage scheme in last month's Budget, so sales will weaken further if manufacturers don't extend their own schemes at the end of this year," he said.

"Sterling's depreciation points on past form to new car prices rising by about 4% in 2018, exceeding the 3.2% increase seen over the last year.

"And demand likely will weaken further as personal loan rate edge up in response to last month's Bank Rate rise and greater regulatory scrutiny. Accordingly, the recovery in car sales will splutter to a halt again soon."