There was an almost 20 percent slump in sales of new cars in Britain in April – the biggest year-on-year drop for over six years.
That reflects record demand in March as people brought forward purchases to avoid a tax increase on the most polluting diesel vehicles that came into force at the start of April.
Demand for diesel vehicles fell 27 percent last month.
April was also hit by fewer selling days due to the Easter holiday according to the industry body the Society of Motor Manufacturers and Traders.
Following an 8.4 percent rise in March and a 19.8 percent drop in April, the SMMT believes things will settle down in the months ahead.
“We … expect demand to stabilise over the year as the turbulence created by these tax changes decreases,” SMMT Chief Executive Mike Hawes said.
SMMT Chief Executive
MikeHawesSMMT</a> on April 2017 registration figures & impact of VED changes on new car market <a href="https://t.co/NpYboQERzR">pic.twitter.com/NpYboQERzR</a></p>— SMMT (SMMT) May 4, 2017
However, the car industry faces a number of challenges including new levies and tighter rules on the most polluting vehicles as the government prepares plans to tackle air pollution.
Britain’s Financial Conduct Authority also said last month it would be launching a review into finance packages offered to Britons buying cars due to concerns that there might be “irresponsible lending in the motor finance industry”.
Cheap finance has been key to the success of the sector in recent years with up to 90 percent of cars sold using personal contract plans, whereby customers effectively rent a new car for two to three years by making monthly payments before often trading it in for a new model.