(Bloomberg) -- U.K. car demand tumbled 9.3 percent in September, the first decline in the key sales month since 2011, as uncertainty over Brexit and concerns about diesel sapped consumer confidence.
With the drop in September, new-car registrations have slumped for the sixth straight month, the U.K.'s Society of Motor Manufacturers and Traders said Thursday in a statement. Sales through the first nine months of 2017 declined 3.9 percent to 2.07 million vehicles.
“September is always a barometer of the health of the U.K. new-car market, so this decline will cause considerable concern,” said SMMT Chief Executive Mike Hawes in the statement. “Business and political uncertainty is reducing buyer confidence, with consumers and businesses more likely to delay big-ticket purchases.”
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The U.K. is Europe's second-largest car market and weakening British demand could have a ripple effect across the region, where auto sales are recovering from the sovereign debt crisis. The September figures are telling because British dealers usually anticipate a rush to secure new license plates, which can help resale value. Economists see Britain's planned exit from the European Union potentially hurting the economy, including the car and retail industries.
Diesel Decline
In the aftermath of Volkswagen AG's emissions-cheating scandal, diesel models were particularly hard hit, with sales plunging 22 percent as buyers worry about potential driving bans due to smog-inducing nitrogen oxides. That hurts environmental policy plans as the cars emit less carbon dioxide than similar gasoline models.
Even with a 41 percent jump in alternative-fuel vehicles, the diesel sales trend means average new-car CO2 levels could rise this year for the first time since records were kept, “thwarting the ambitions of both industry and government to meet challenging CO2 targets,” the SMMT said.
Adding to the uncertainty over diesel and the rocky negotiations over the U.K.'s exit from the EU, some British car demand this year was pulled forward as buyers sought to avoid new emissions-based duties that went into effect in April.
The weaker pound has prompted manufacturers to increase prices, exacerbating consumer hesitance to buy splurge on mass-market brands. Ford Motor Co., the U.K.'s best-selling auto brand, sold 20,000 fewer vehicles in the first nine months of the year, causing its market share to slip to 11.3 percent from 11.8 percent.
Deliveries for Vauxhall, which was bought by France's PSA Group this year, tumbled 20 percent, causing the former General Motors Co. nameplate to slip below VW to No. 3 in Britain. PSA is working on a turnaround plan for Vauxhall and its German affiliate Opel focusing on cutting costs and reducing unprofitable models. PSA's other brands also shed market share in the U.K., with Peugeot sales falling 16 percent, Citroen down 19 percent and DS plummeting 43 percent.
Buyers might be showing “some fatigue” after price increases implemented by big manufacturers in the first half, Pierre Quemener, an analyst with MainFirst Bank, said in an email.
--With assistance from Zoe Schneeweiss
To contact the reporter on this story: Thomas Seal in London at tseal@bloomberg.net.
To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Tom Lavell
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