News ID: 194132
Published: 1105 GMT June 05, 2017

Car industry ubpeat after sales drop on new emission tax

Car industry ubpeat after sales drop on new emission tax

Punitive taxes on new cars, which sent vehicle sales into freefall in their first month, are still putting the brakes on the industry, new registration data are likely to show this week.

The number of new cars being driven off dealers’ forecourts plunged 20 percent in April as changes in vehicle tax rates took their toll on demand, according to The Telegraph.

Although many in the industry attributed the drop to motorists racing to beat new the new vehicle excise duty regime and ‘pulling forward’ sales to the start of the year, early indications are that official registrations data will be down again in May compared with the same month a year ago.

Under rules that came into effect on April 1, buyers of new cars pay tax based on the car’s emissions for the first year. After that, there is a flat fee of £140 for petrol or diesel vehicles, while cars costing more than £40,000 will be subject to an additional £310 surcharge.

Last year, there were 203,585 cars registered in May, and indications from industry are that this year the level will decline. Demand was nearly 10 percent down at the start of the month, though it is understood buyers have since returned, and dealers have been pushing hard to recover lost ground and hit targets as the month went on.

However, dealers remain confident about the state of the market, saying on a year-to-date basis they expect sales to have held up.

This is a more upbeat view than that given by the Society of Motor Manufacturers and Traders, the industry body, which is predicting that sales for the full year will be down by about five percent on the record 2.7 million cars sold in 2016.

Trevor Finn, chief executive of Pendragon, one of the UK’s two biggest dealers, said: “There was lot of pre-registering by dealers ahead of the tax change that put inventory into the fleet and that’s going to take a little time to unwind.

“We saw some unusual trading patterns, and it’s a strange thing to think that a car registered a day later attracts more tax than one exactly the same which is registered the day before.”

Finn said as the year wore on, demand would even out, with fleet buyers making up for a drop in retail buyers, adding that manufacturers had decided where to send output months ago and redirecting supply could be difficult and expensive for them.

The sentiment was echoed by Andy Bruce, chief executive of Lookers, Pendragon’s biggest rival.

“There is a mismatch between orders for cars and sales, but the measure that really matters is how many cars we selling, and that is flat,” he said.

Bruce pointed out that demand could also have been hit by the election being called, which could create uncertainty among buyers, making them more reluctant to make expensive purchases.

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