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New car registrations rose at their fastest rate for nearly two years in May as more private consumers returned to showrooms despite the unsettling news from the eurozone, the group representing UK-based carmakers said.
A total of 162,288 passenger vehicles were registered last month, 8 per cent more than in May 2011, the Society of Motor Manufacturers and Traders said on Friday. The percentage rise was the largest in 23 months, and the third monthly increase in a row.
“May’s 7.9 per cent increase in new car registrations is good news for the motor industry and the UK economy, particularly the steady growth in demand from private buyers,” said Paul Everitt, SMMT chief executive.
Until recently, demand for cars in Britain had been driven primarily by fleet sales, with companies and their employees trading in old vehicles and taking advantage of tax benefits for new lower-emission ones. Registrations of private cars rose 14 per cent in May, and were up 9 per cent over the first five months of 2012, while fleet registrations were 5 per cent higher than a year ago.
The May registration number was 6 per cent or 9,000 units higher than the SMMT’s forecast for the month.
In the UK, as across Europe, carmakers have been offering generous discounts and other incentives such as financing to tempt buyers into dealerships at a time of economic uncertainty. Some consumers have also been trading in vehicles during the crisis for economic reasons, to take advantage of the wider range of more fuel-efficient models.
The rise in registrations, Mr Everitt said, also suggested that “confidence is returning, despite financial uncertainty in the eurozone”.
Analysts said the data were encouraging, but warned the market could slow again in the second half of this year.
“Undeterred by economic concerns, consumers are still buying new cars, increasingly encouraged by new efficient models,” wrote Richard Lowe, head of retail and wholesale at Barclays in response to the figures.
He added, however, that this summer’s sporting events might cause some consumers to avoid showrooms, and the expected rise in fuel duty could also put car registration figures under pressure in the second half of the year.
Howard Archer, chief UK and European economist at IHS Global Insight, a consultancy, wrote that the sharp drop in oil prices recently was “very good news for the car industry”, as petrol prices had fallen from their April high.
But he added that consumers still faced a “pretty tough” overall environment because of high unemployment and muted wage growth. “While the May car sales data are encouraging, the motor industry still faces very challenging conditions, with consumers remaining under major pressure from squeezed purchasing power and elevated unemployment,” he wrote.