January 5, 2018 / 12:03 AM / 7 months ago

UK new car sales record biggest drop since 2009

LONDON, Jan 5 (Reuters) - British new car sales recorded their biggest drop since 2009 last year, falling by more than 5 percent due to uncertainty over potential new diesel charges and weakening consumer confidence since Brexit, an industry body said on Friday.

Registrations ended 2017 at around 2.54 million vehicles, according to provisional data, and are set to fall up to 7 percent this year, the Society of Motor Manufacturers and Traders (SMMT) said.

Demand for diesel cars fell 17 percent as consumers were put off by potential new charges, pushing up average CO2 emissions for new cars for the first time in two decades as some switched to petrol.

Last year’s drop in total sales is the biggest since demand nosedived in 2009 in the wake of the financial crisis, but comes after two years of record highs in 2015 and 2016.

Sales in December fell 13.9 percent and SMMT Chief Executive Mike Hawes said further declines were likely over the next few months.

“The two main reasons are business-led and consumer confidence and the confusion around diesel which has caused hold-off,” he said of last year’s fall.

“The first quarter is going to be tough and March (last year) in particular was an all-time record month. We ain’t going to get that next March.”

Britain’s automotive sector is also concerned its cars could face tariffs of up to 10 percent and be hit by customs delays if the government fails to strike the right Brexit deal.

There are investment decisions which are pending as companies await clarification on the terms of a transitional deal which will bridge Britain’s exit from the EU in March 2019 into a new relationship with the bloc, Hawes said.

“Some of those decisions are overdue, they need clarity urgently and certainly the turn of the first quarter is what they have been saying to me,” he said.

Honda is one of several carmakers considering contingency plans involving possible extra warehousing and stockpiling of parts and has said it needs clarity by March on a transitional deal.

Hawes said any additional cost borne by British plants could hit the sector.

“That’s the thin end of the wedge ... How do you secure that next piece of investment when you’re less competitive because you’ve got to warehouse?” (Editing by Mark Potter)

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