UK car sales slide

Sales of popular family cars and 4x4s tumbled last month in apparent reaction to the economic slowdown, rising fuel prices and the Government’s proposed increase in road tax, which is scheduled to be introduced next year.Perhaps unsurprisingly, registrations of SUVs plummeted by 18.3 per cent, but sales of popular family cars like the Ford Focus have also suffered; its total dropped 8.3 per cent compared with May 2007, despite the more economical engines introduced as part of its recent refresh.The sports car segment suffered a sales drop of 14.5 per cent. But sales of luxury executive saloons, like the Mercedes E-class and BMW 5-series, are remaining buoyant, suggesting that company fleet schemes have yet to feel the pinch.These latest SMMT sales results provide the first evidence of the impact of the Government’s proposed changes to Vehicle Excise Duty – commonly known as road tax - since their were put forward in Chancellor Alistair Darling’s budget. The drivers of some cars will see their road tax double.Yesterday the Treasury revealed that more than a million households with gross incomes of less than £15,000 face above-inflation increases in road tax. Poorer families tend to drive older, less-efficient cars. Indeed, the Budget’s road tax increases have been described as a “poll tax on four wheels” by one rebel Labour MP.The value of secondhand cars has also taken a blow since it emerged that the road tax changes will be applied retrospectively to vehicles registered since 2001. “People are now finding themselves in negative equity,” said Edmund King, president of the AA. “We are talking to people who are extremely concerned. They can't afford to run their vehicles but they are trapped as they can't sell their cars.” In another blow to Gordon Brown, Tony Blair told GMTV that the cost of motoring was contributing to the Prime Minister’s unpopularity and his disastrous poll rating. Blair said, “Voters are thinking, ‘It used to cost 30 quid to fill up the car; now it costs 60 or 70 quid.’” In developing markets elsewhere in the world, car sales are booming. Ford has just announced a $500 million (£260m) expansion of its Chennai factory, South India, which will be used as a hub to serve the region. Meanwhile, Russia’s third-largest car maker, OAO Sollers, will invest $200 million (£110m) to expand its dealer network to respond to soaring demand.

Will Powell

Read James Ruppert's blog on falling new car sales.