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UK car sales fall 6.8% YOY on lower consumer confidence, regulatory changes

U.K. car sales fell for a second straight year in 2018, plunging 6.8% year over year to 2.37 million due to regulatory changes and declining consumer confidence, the Society of Motor Manufacturers and Traders said Jan. 7.

Sales of new cars to renew company fleets in the U.K. fell 7.3%, larger than the 6.4% drop in sales to private buyers and 5.6% decline in sales to small businesses, the Society of Motor Manufacturers and Traders, or SMMT, said.

Diesel car sales plunged 29.6% versus 2017, in line with its loss of popularity across Europe following Volkswagen AG's emissions cheating scandal that also drew attention to the harmful effects of nitrogen dioxide gases that tend to be higher in diesel vehicles than in petrol-burning engines.

"A second year of substantial decline is a major concern, as falling consumer confidence, confusing fiscal and policy messages and shortages due to regulatory changes have combined to create a highly turbulent market. The industry is facing ever-tougher environmental targets against a backdrop of political and economic uncertainty that is weakening demand so these figures should act as a wake-up call for policy makers," SMMT CEO Mike Hawes said in a statement.

The SMMT pointed to a "wait and see" approach by some diesel car owners who have been delaying new purchases while they monitor rapidly changing costs and benefits for different vehicle types amid shifting regulations on exhaust emissions and incentives for purchasing hybrid and electric cars.

Sales of alternative fuel vehicles, which include hybrids, battery electric and hydrogen fuel cell cars, rose 20.9% during 2018. Plug-in hybrids posted the strongest sales growth within that segment at 24.9% versus a 13.8% increase in registrations of battery electric cars, which have been hampered by the reduction of government incentives and subsidies, the SMMT said.

Sales of superminis and lower medium-sized cars, which account for 59% of U.K. car sales, slipped 2.5% and 9.4%, respectively, while average CO2 emissions rose 2.9% to 124.5 grams per kilometer, which the SMMT attributed in part to more drivers switching from diesel to petrol cars, which emit higher levels of carbon dioxide.

Meanwhile, Germany's Federal Motor Transport Authority said Jan. 4 that annual sales of passenger cars slipped 0.2% year over year to 3.44 million. Diesel cars' market share fell 6.5 percentage points in 2018 in favor of gasoline cars, sales of which grew 4.7 percentage points. Hybrid vehicles' market share grew to 3.8%, while battery electric cars reached a milestone of 1% of total car sales.