Weak Car Sales

The SMMT (Society of Motor Manufacturers and Traders) reports continuing weakness in the new car market.

Sales fell 22% year-on-year, the fourth successive monthly decline, although the 2009 figure was boosted by the scrappage scheme. Diesel cars now account for 54% of the market, a new high. This is good news for carbon emissions, but diesels have generally higher emissions of other pollutants (particulates and NOx).

The SMMT commented "The industry expects the coming months to be challenging with slow, but steady, economic growth feeding through to improved confidence and demand during 2011."

I wouldn't be so confident. For starters, the VAT rise will kick in at the beginning of the year, adding nearly £400 to the price of a £15,000 car. Secondly, the prospect of public-sector contraction and its associated job losses will cast a long shadow over consumer confidence. One has to bear in mind that there are many households where one wage-earner is employed in the public sector, and such households will likely be reluctant to make any big-ticket purchases if the job security of one partner is under threat. On the other hand, public transport fare rises could prompt car purchases.