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Car sales plummeted 20% in April as new tax rates and shadow over diesel took a toll

New car registrations suffered a ‘significant decline’ in the month of April, industry figures have shown, as the rush to beat car tax changes and worries over diesel took their toll.

The Society of Motor Manufacturers and Traders said 152,076 17-plate models were registered last month – which is fully 19.8 per cent down on the previous year.

It claimed that some of the damage was done by motorists bringing planned purchases forward to beat new VED tax rates that came into force on April 1. But a dramatic 27.3 per cent drop in diesel sales suggests that worries over government measures to reduce the nation’s emissions output has pushed buyers away.

A 20% drop-off in April: Registrations dropped by 19.8% last month – it’s the lowest volume of sales in April for four years, the SMMT confirmed

The new stats showed that demand was down across the board, with registrations by private buyers, businesses and fleets all in free-fall at the rate of 28 per cent, 21 per cent and 12 per cent respectively.

As well as a plummet in diesel sales, petrol and alternatively fuelled vehicle demand also declined.

Unleaded car sales dropped by 13.1 per cent and alternative fuel cars – including many hybrids and plug-in hybrids that are no longer free to tax under new rules – fell for the first time in 47 months, declining by 1.3 per cent.

Yet, it follows a record-breaking March, in which the UK’s new car market grew by 8.4 per cent. Some 562.337 new models were registered – more than three times the amount in April – making it the biggest month since records began.

Today’s confirmation of a decline in new car sales last month has put a handbrake on what looked set to become a back-to-back record-high year for vehicle registrations.

However, even despite the recent dip, overall new car sales for the year to date stands at 972,092, which is 1.1 per cent higher than this time last year.

Despite the decline in April, year-to-date figures show that sales are 1.1% ahead of last year. However, diesel is down by more than 6% in the first four months of 2017

The SMMT was steadfast in its assessment that the decline was mostly down to attempts to beat car tax changes that were introduced at the beginning of the month.

Mike Hawes, chief executive at the industry representative, said, ‘With the rush to register new cars and avoid VED tax rises before the end of March, as well as fewer selling days due to the later Easter, April was always going to be much slower.

‘It’s important to note that the market remains at record levels as customers still see many benefits in purchasing a new car.

‘We therefore expect demand to stabilise over the year as the turbulence created by these tax changes decreases.’

But the figures also appear to signify that drivers are hesitant about buying diesel in the face of new measures to drive high-polluting vehicles off the road and Chancellor Phillip Hammond’s promise to ‘explore the appropriate tax treatment for diesel vehicles’ ahead of his next Autumn 2017 Budget.

Shaun Armstrong, managing director at online car finance provider Creditplus.co.uk, said: ‘The VED tax changes clearly contributed to a rush of new registrations in March and an inevitable lull in April. But diesel registrations haven’t fallen off a cliff simply due to this post VED lull.

‘Buyers have been spooked by the planned introduction of a toxin tax on diesel cars and the London Mayor Sadiq Khan announcing an additional charge on polluting diesel vehicles entering central London.

‘Theresa May then showed her disdain for diesel by hinting that the Government is considering introducing a scrappage scheme to incentivise drivers to trade in older diesel vehicles.’

Experts have warned that the turbulent political landscape, rising inflation and reduced consumer spending will hinder new-car growth for the rest of 2017

Challenging times ahead

Industry insiders didn’t share Hawes’ optimism about the market recovering, with experts claimed the drop was also due to the ‘volatile economic climate’, which poses further challenges for the motor industry going forward.

Chris Boswoth, director of strategy at Close Brothers Motor Finance said: ‘We expect the turbulent political landscape, rising inflation and its impact on consumer spending will also hinder new car growth in the months ahead.’

Bosworth added that car buyers will now look to ‘nearly new stock’ on the used market as a means to avoid the higher VED rates.

Dr Howard Archer, chief economist at IHS Makit commented: ‘The serious concern for the car sector is that it looks highly probable that the fundamentals for consumers will weaken markedly further over the coming months as rising inflation eats further into purchasing power with the squeeze reinforced by muted earnings growth.

‘There is also a strong likelihood that consumer confidence and willingness to buy major items will not only be pressurised by weakening purchasing power but also by increasing concerns over the economy and jobs as growth likely slows and uncertainties are magnified by Brexit coming more to the forefront now that Article 50 has been triggered.’

Simon Benson from AA Cars said the April’s figures have ‘caught some in the industry by surprise.

‘With consumers turning away from the new vehicle market across the country, the knock-on effect of this slowdown could prove to be an enormous opportunity for used car dealers,’ he said.

‘The cost of living is rising, while consumer confidence and spending are starting to contract. That bodes well for the second-hand car market.’

The Ford Fiesta was the nation’s best seller in April, though it was only 527 units ahead of the Nissan Qashqai during the month