Small cars and diesel registrations fuel new car market in 2007

New car registrations in 2007 rose by 2.5 per cent or 59,143 units, according to the Society of Motor Manufacturers & Traders (SMMT). They surpassed the forecast at the start of the year by almost 90,000 units. The 2007 performance was the sixth highest on record.

Volumes in the final quarter rose by 4.6 per cent, or 20,516 units, the strongest rate of growth since the first quarter of 2004.

Registrations in December rose for the fourth successive month and for the ninth time in 2007.

Outlook for 2008 cautious, but not pessimistic

Despite a strong final quarter, the outlook for 2008 is not expected to change dramatically compared to year-end 2007.

The forecast is for the 2008 market to drop very slightly to 2.34 million units.

The underlying economy remains strong and consumers continue to spend. Manufacturers have also supported a competitive market, with strong finance deals and other offers.

Growth recorded across all sales types in 2007

The improvement in private demand in 2007 was encouraging, since some commentators had predicted a slump on the back of the crisis in the banking sector.

Fleet and business sales also posted growth in 2007. The fleet/business market posted the strongest gains and represented 80 per cent of the net volume gained in the year.

Focus UK's top seller for ninth year in a row

The Ford Focus has been the best seller every year since 1999. Almost 1.2 million Focus models have been registered in the UK. Ford was the best selling manufacturer in 2007, although Audi, Honda, MINI and Vauxhall showed some of the most improved performances of the year.

All segments bar the mini, upper medium and luxury saloons posted improved volumes in 2007. The MPV market showed the best growth, up 16.5 per cent. Supermini volumes were up 17,729 units, but the lower medium segment (eg Ford Focus) posted the biggest rise - up 25,084 units.

Diesel penetration hits record high

Diesel-powered cars represented over 40 per cent of the 2007 market, their highest ever share.
Volumes rose by 68,915 units to a record 967,436 units in the year. The gains reflect better fuel consumption, stronger performance and lower CO2 emissions - a package more consumers demand in the showroom.

Diesel penetration is expected to improve further in 2008.

Economic analysis

Interest rates were cut by a quarter-point to 5.5 per cent in December - the first cut since August 2005. The move was in light of the US credit crunch, which some commentators predict will impact on the UK economy. GDP growth is expected to slow to less than two per cent in 2008 as a result of this.

Further base rate cuts might prove necessary, in an effort to help stimulate consumer confidence, bolster the housing market, and dampen the threat of a hike in mortgage repayment costs hitting many this year. However, inflationary pressures remain and could constrict base rate movements - with oil, energy, rail and food costs all currently on the rise.

Paul Everitt, SMMT chief executive, said: “Last year demand for new cars was stronger than many had predicted, there is little sign that the US credit crisis or rising fuel prices have affected demand and we foresee only limited changes through 2008. The UK economy currently remains resilient and the new car market is ultra-competitive. Car makers will continue to fight hard for every sale and consumers will benefit from unprecedented choice and excellent deals.”