New car market continues to bloom in July

The new car market rose in July – although the rate of growth was better than forecast, according to the Society of Motor Manufacturers and Traders (SMMT). Registrations rose by 4.9 per cent in the month, the best gain this year since January.

July's gain did come on top of a 4.1 per cent decline last year, but maintains the growth momentum seen over the first half of the year. Registrations were up 33,640 units over the first seven months of 2007.

The total for July was just under the 1999-2006 average for July of 177,349 units.

In July SMMT revised upwards the full year forecast by 20,000 units to 2.355mn units, with the market now expected to post modest growth this year.

The outlook remains cautious, after the base rate rose to 5.75 per cent in July. Consumer spending and GDP growth is expected to moderate in the second half of the year and offset the positive impact of new models and enticing deals.

Growth focus fleet/business but private up too

Business demand continues to recover smartly, with a second successive double digit gain in the month. Fleet demand rose by 5.8 per cent, after two months of modest declines. Over the year-to-date the fleet/business market was up 3.4 per cent.

Encouragingly, private demand is also up for a fifth time this year, despite concerns over consumer spending and the impact of higher base rates. Private sector growth over the first seven months, however, remains only modest at 1.1 per cent.

Focus returns to top spot, MPV sales soar

After being knocked off the number one slot in June by the Vauxhall Astra, the Ford Focus was back in pole position in July. VW's Passat made a rare top 10 appearance, but it was MPVs which showed the best growth.

MPV volumes were up 34.2 per cent in the month and 16.4 per cent over the year-to-date, as Ford and Vauxhall ranges did well.

Supermini demand has risen by five per cent over the first seven months of 2007.

Diesel registrations hit 41.2 per cent in July

Growth in demand for diesel-powered cars jumped to its highest rate since January. Diesel penetration passed 40 per cent for the first time this year and was well above last July's 38.9 per cent rate. Diesel penetration over the first seven months of 2007 has climbed to 39.0 per cent, compared with 37.5 per cent a year ago.

VW's Passat was the best selling diesel model in July. The Focus remains top over the year-to-date.

Economic analysis

Base rates have risen five times in the past year, to 5.75 per cent in July. This is their highest level since spring 2001. Expectations are that rates are likely to climb at least once more before the end of the year. Higher base rates squeeze spending on discretionary items, like cars.

'Trying to predict the spending habits of the motorist is as tricky as forecasting the British weather, and July has given us both of those challenges in spades,' says Christopher Macgowan, chief executive of SMMT. 'In spite of interest rate rise concerns and the traditional quiet holiday period, new car registrations have exceeded expectations. Interestingly, diesel cars took a whopping 41.2 per cent share of the total registrations, which should help government and industry with their CO2 reduction targets.'