Diesel collapse blamed for 6% drop in UK December sales

UK new-car sales fell 5.5 percent in December to 144,089 as buyers continued to avoid diesel cars amid a crackdown on the fuel to combat rising NOx pollution in cities.

Full-year registrations were also hit by collapsing diesel demand, with total market sales falling 6.8 percent to 2.37 million, the fastest rate of decline since the global financial crisis a decade ago.

The December decline marked the 21st consecutive monthly fall in diesel sales, industry body SMMT said on Monday. The SMMT blamed "anti-diesel rhetoric and negative fiscal measures" for lower demand for diesels, whose sales plunged by nearly 30 percent in 2018.

Many diesel owners are adopting a 'wait and see' approach and keeping hold of their older, more polluting vehicles for longer, the SMMT said.

The UK market's No. 1 and No. 2 best-selling brands, Ford and Volkswagen, bucked the market downturn last month. Ford registrations rose 6.1 percent while VW brand sales rose 4.3 percent.

Other gainers included Dacia, up 92 percent, Mitsubishi, which rose 40 percent, Volvo, up 20 percent and Fiat, whose sales also increased 20 percent.

• Download file here for December, 12-month UK sales by brand

Among the major losers last month, Toyota whose sales plummeted 43 percent, and Audi registrations fell 41 percent. Nissan sales dropped 32 percent, while Seat volume was down 27 percent. Hyundai registrations fell 20 percent, Skoda was down 17 percent and BMW sales dropped 14 percent. Vauxhall was down 4.9 percent.

Diesel sales fell 26 percent in December to 42,465 vehicles, with market share down to 29.5 percent from 37.8 percent in December 2017. Sales of new gasoline cars rose by 7.2 percent to 92,731, with share up to 64.6 percent from 56.7 percent.

New WLTP emissions rules which came into force in September also impacted sales by disrupting the supply of some models, the SMMT said.

Demand this year could also be distorted if British buyers expect tariffs to be introduced after Brexit, perhaps pushing up registrations in the first three months of 2019. "The fear of tariffs might encourage some people to purchase in the first quarter," SMMT CEO Mike Hawes said. "The flip side of that is: 'Well I don't know what's going to happen to the economy if you have a no deal so I will wait and see'."

The rise in gasoline-car sales and drop in diesel means the average CO2 emissions of new cars sold in Britain in 2018 rose just under 3 percent, posing a headache for automakers who need to reduce levels to meet stricter regulations.

The SMMT warned that Britain's departure from the European Union due at the end of March risks the future of a sector which employs over 850,000 people and has been one of Britain's few manufacturing success stories since the 1980s.

"It's still hard to see any upside to Brexit," Hawes said. "Everyone recognizes that Brexit is an existential threat to the UK automotive industry and we hope a practical solution will prevail," he said, calling for lawmakers to back Prime Minister Theresa May's deal to guarantee a transition period.

Britain, the world's fifth largest economy, is due to leave the globe's biggest trading bloc in just over 80 days with May's agreement looking set to be voted down, leading to a possible no deal Brexit and the imposition of tariffs and customs checks.

Investment looks very likely to have fallen in 2018, the SMMT said, and sales this year are forecast to drop again as the industry body warned a no-deal Brexit would hit jobs. "You are not going to see immediate closure of plants but what you could see is a reduction in production volumes and certainly, these are often international companies who have alternatives," Hawes said.

Some analysts see car demand as a leading indicator which could be a harbinger for future economic performance.

Reuters contributed to this report