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Company car tax confusion blamed as new car sales fall

Date: 29 April 2019   |   Author: Sean Keywood

Uncertainty over WLTP and BIK rates could be a factor in a slow start to the year for new car sales. Sean Keywood reports.

UK new car registrations were down by 2.4% in the first quarter of 2019, with confusion over the future of company car tax thought to be partly responsible.

Figures from the Society of Motor Manufacturers and Traders (SMMT) showed that while over the first two months of the year the market was fairly stable, with registrations down only 0.6% on 2018, March then saw a 3.4% fall - significant as a number plate changeover means it features more registrations than January and February put together.

Fleet registrations were slightly disconnected from these market trends.Having fallen by 2.8% over January and February, they recorded a 0.3% rise in March to stand at 0.9% down for the year so far.

In contrast, private registrations went from a 3.7% rise over January and February to a 2.8% decline in March, which combined equates to a 0.8% fall for the year to date.

There has been a big drop in business registrations, classed by the SMMT as those to firms with fewer than 25 vehicles, which are down 41.4% for the year to date; however, these only make up 2.4% of the overall market.

Reacting to the figures, Lex Autolease head of consultancy Ashley Barnett suggested confusion over company car tax could be partly to blame for the quarterly fall, with longer-term trends revealing a bigger decline.

He said: "If we compare to this point in 2015, we are down by 4.5% on registrations, with more people extending existing contracts. This suggests that confusion around future company car tax and WLTP is holding back people from ordering a replacement vehicle. 

"The outcome of the consultation into WLTP and its impact on BIK and VED, should provide some clarity when we see this in a couple of months."

Turning to fuel mix, the quarterly figures also show no end in sight to the decline in diesel, which was down by 20.3%, despite the sales backlash against it having already been in full force at the start of 2018.

Petrol was up by 5.9%, while alternatively fuelled vehicles have seen a 14.7% increase, taking them to nearly 6% of the overall market - a figure that, according to Barnett, is not good enough.

He said: "While we are undoubtedly heading in the right direction, we are still some way behind where we need to be for the government's 2030 Road to Zero target to be achievable - we need an additional 100,000 new alternatively fuelled registrations each year to enable us to reach this.

"In an environment where there are no grants available for plug-in hybrids and reduced grants for pure electric vehicles, the upfront cost of an alternatively fuelled vehicle is, for some, an ongoing barrier to entry.  

"We would welcome a wide-reaching announcement from the government designed to increase the appeal of low and zero-emission driving, including benefits for the used car buyer."

Offering his take on the latest figures, SMMT chief executive Mike Hawes also called for government action.

He said: "March is a key barometer for the new car market, so this fall is of clear concern. 

"While manufacturers continue to invest in exciting models and cutting-edge tech, for the UK to reap the full benefits of these advances, we need a strong market that encourages the adoption of new technology. 

"That means supportive policies, not least on vehicle taxation and incentives, to give buyers the confidence to invest in the new car that best meets their driving needs. 

"Above all, we urgently need an end to the political and economic uncertainty by removing permanently the threat of a 'no deal' Brexit, and agreeing a future relationship that avoids any additional friction that would increase costs and hence prices."

The first quarter of the year has seen the Ford Fiesta retain its position as the UK's bestselling car, with 23,474 registrations, ahead of the Vauxhall Corsa with 17,647 and the Volkswagen Golf with 17,412.

Completing the top five were the Ford Focus on 16,668 and the Mercedes-Benz A-Class with 16,632.