Car market dips in May

Car registrations fell by a modest 3.5% in May or 6,525 units. This was the first fall in volumes since February 2008 and comes after two months of surprisingly robust growth, according to the Society of Motor Manufacturers & Traders (SMMT).

May’s volume was on par with our forecast of 179,000 units and left volumes over the first five months of 2008 down just 0.6%.

Between 1999 and 2007, May has averaged 192,838 units, or an 8.0% share of the annual market. The 2008 performance was 7.0% or 13,566 units shy of this and was the weakest May volume since 1999.

Outlook remains cautious, with volumes expected to slide further

The slowdown remains relatively mild, considering the warning signs from other areas of the economy. However, manufacturers and dealers are offering competitive prices and attractive deals to maintain volumes whilst trading conditions are tough.

The 12 month rolling total eased to 2.398 million units in May. Volumes would need to slip by some 63,000 units over the remaining seven months to achieve our full year 2.335 million unit forecast.

Weaker private demand a concern

May marked the first sizeable downturn in private demand with volumes down 9.5% or 7,709 units.

The business market was also very weak during the month. However, fleet volumes rallied to off-set some of the declines elsewhere.

Over the first five months of the year only the fleet market has grown.

Focus still top, but mini sector booms

Ford’s Focus maintained its best seller’s slot in May. Once again the Zafira performed well inside the top ten, and upper medium segment cars occupied the final three slots in the rankings, reflecting the strong fleet sales recorded in the month.

The mini segment showed the strongest growth in May, with registrations up 120%. The newly launched Hyundai i10 was the best seller in the segment.

Diesels growth sustained

Set against a backdrop of rising fuel costs, CO2 based taxes and consumers looking to improve their carbon footprints, growth in the diesel market is to be expected. Diesel volumes and market share improved in May.

The Ford Focus was the best selling diesel model, but the VW Golf remains number one over the year-to-date.

Demand for alternatively fuelled vehicles (AFVs) slowed for the first time this year in May, down 8.3%.

Economic analysis

Official data for quarter one showed that whilst headline GDP growth figures did ease to 2.5%, consumer spending remained firm and improved to 3%.

This figure was more robust than had been expected. However, concerns over the outlook for both GDP and consumer spending growth remain.

Figures from the Nationwide show house prices are falling, and with general costs rising - notably fuel and energy bills - consumers will have less money to spend on discretionary items and may be feeling less confident.

Paul Everitt, SMMT chief executive, commented: “The slow-down in the overall new car market in May comes as no surprise and reflects concerns across the economy.

“The figures are in line with SMMT forecasts for 2008, and we expect a tough year ahead. Vehicle manufacturers and dealers will have to work hard to attract consumers, who are facing increasing household and motoring expenses.”