New car market remains subdued in January

The new car market continued to decline sharply at the start of 2009, with volumes down by over 30%, according to the Society of Motor Manufacturers and Traders (SMMT).

Consumers remain concerned the general economic gloom will impact upon them directly. With jobs being lost, consumers appear unwilling to spend on large discretionary items like cars.

The market is expected to decline by 19.3% in 2009 to 1.72 million units. This would be some 410,000 units off the 2008 total and almost 685,000 units down on 2007.

The temporary VAT cut in December is one measure to help the market recover, but the impact is equivalent to a 2.1% cut in prices. Manufacturers continue to offer finance and deals, but are seeking further government support to kick-start demand.

All sales types fell in January, although the fall in the private sector was less steep – perhaps reflective of the VAT cuts but more likely that the private sector had already begun to decline in January 2008.

In January diesel penetration rose to match its second highest level ever, but diesel volumes still fell by 29.7%. Alternatively fuelled vehicle (AFV) demand showed a particularly sharp decline, down 47.4%, in part reflecting strong growth in 2008.

All segments showed falling volumes in January, except the mini segment – which was up 40.8%. Supermini demand slowed less steeply than in other segments to post a market share up almost five percentage points to 35.6%.

The new Ford Fiesta was the top selling model for a third successive month in January.

Paul Everitt, SMMT chief executive, said: “There is a clear need to stimulate demand for new vehicles in the UK market. A number of EU member states have launched scrappage incentive schemes, which have the benefit of boosting consumer confidence and delivering significant environmental improvements.

“The UK motor industry is urging UK government to introduce a similar scheme and help sustain jobs and businesses throughout the sector.”