February car sales grow by 26 per cent

New car sales grew by 26.4 per cent in February this year, compared to the same month of 2009, the latest data from the Society of Motor Manufacturers and Traders (SMMT) has revealed.

A total of 68,686 new cars were registered in the month as the industry, with private sales driving the growth in sales. As the scrappage scheme entered its final months, car buyers continued to place orders through the scheme before the last available grants were divided up among the participating carmakers. The scheme accounted for a total of 19.6 per cent of the February new car market.

It was the eighth successive month that the market showed growth, rising on weak demand in the early part of 2009. Small cars performed strongly through the month, while the top selling cars of the month were the Ford Fiesta and Ford Focus. Business demand for new cars also appears to have rallied as the market headed towards the key month of March when the new ‘10’ plate became available. According to the society business sales grew 9.6 per cent in February to 2,348 new cars while fleet grew by 4.3 per cent to 35,540 vehicles.

“Scrappage has generated eight consecutive months of growth in the new car market and we expect its benefits to stretch beyond the scheme’s closure later this month,” said SMMT chief executive, Paul Everitt.

However the car industry is bracing itself for a reduced market for new cars as the scrappage scheme closes at the end of this month, just as new ‘showroom taxes’ are introduced on April 1, 2010. The showroom taxes will see higher CO2 emitting vehicles pay a higher rate of first year road tax as a incentive to choose lower emitting cars. While the scrappage scheme is expected to boost new car registrations for a few months after it is gone, due to waiting times on deliveries, the society is predicting a market decline in the second half of 2010.

The Government is also considering introducing a higher VAT rate of 20 per cent when the Budget is released this month, which would push the cost of buying a new car even higher. The society has warned the Government that such a month could be disastrous to a delicate market.  The automotive industry is a vital part of the UK economy with £51 billion turnover and £10 billion value added. With over 800,000 jobs dependent on the industry, it accounts for 10 per cent of total UK exports.

Sue Robinson, Director of  the Retail Motor Industry Federation(RMI) commented: “The scrappage scheme has tempted private buyers back into the new and used car market.

“The small car sector has done particularly well under the scrappage scheme and from customers looking for value for money vehicles; this can be seen with marks such as Kia and Hyundai doing particularly well.

“The continuing outlook for 2010 is set to be challenging with a level of uncertainty being caused by the imminent general election, it is likely that tax rises, public spending cuts and the end of the scrappage scheme in March will make consumers more cautious in their spending, certainly in the shorter term.”

Author: Faye Sunderland, March 4th, 2010
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