Smoother ride for UK car registrations over summer

New car registrations in July grew for the third out of the last four months, with 163,898 new cars taking to the roads as summer sales offers helped keep the market on the road.

Year-on-year demand grew by 1.2% over the month, according to figures released on Monday by the Society of Motor Manufacturers and Traders (SMMT), as demand for petrol and alternative fuel vehicles (AFVs) grew by 20.1% and 21.0% respectively.

Before picking up in April, car sales had fallen for 12 successive months and despite the modest increase in three of the past four months, new car sales are still down 5.5% year-on-year over the first 7 months of 2018.

At the other end of the scale, demand for diesel vehicles fell by 24.4% year-on-year as AFV growth was fueled by plug-in hybrids, which saw growth of 33.5%.

Mike Hawes, chief executive of SMMT, said: “It’s great to see alternatively fueled vehicles benefiting from this growth, and government’s acknowledgement of the vital role new-tech diesel will play in its road to zero strategy should help more even more motorists benefit from the latest, safest and low emission technology over the coming months.”

Registrations from smaller businesses fleets fell 10.2% in July, demand from private buyers was flat and large fleets grew by 2.6%.

“The feel-good factor from a sun and sport-packed July, combined with some fantastic deals on a raft of exciting new models, clearly helped keep showrooms relatively busy last month,” said Hawes.

Despite the recent gains in new car sales, the coming months look likely to be relatively challenging for the car sector said economist Howard Archer at the EY Item Club.

"While consumer purchasing power has improved overall in recent months with inflation moderating and earnings growth firming progress has been slow," he said, noting that earnings growth was soft in April and May, while consumer confidence remains fragile and recently higher fuel prices are hardly the best news for the sector.

"Car sales are likely to be hampered by mounting pressure to restrict car finance deals and unsecured consumer credit," Archer said. "The Bank of England has shown growing concern over this and is keen for a more responsible approach to be adapted. This is magnified by concerns over the resale value of cars at the end of Personal Contract Purchase deals."