The slump in UK car sales eased off last month as the government's car scrappage scheme lured customers back into showrooms, according to new data that gives hope to the beleaguered car industry.
Figures released by the Society of Motor Manufacturers and Traders (SMMT) showed 176,264 vehicles were sold in June, up from 134,858 in May.
This was 15.7% less than a year ago but was the smallest year-on-year fall since July 2008 and a marked improvement on the 28% year-on-year decline seen in the first five months of this year.
June was the first full month of operation for the government's "cash for bangers" scheme, which encourages people to buy new cars by giving a £2,000 payment for their old vehicle. The SMMT believes the scheme resulted in about 23,000 extra sales in June.
"We are now beginning to see the positive impact of the scrappage scheme translate into new vehicle registrations," said Paul Everitt, the SMMT chief executive. "We can already see the industry making steady progress on the long road to recovery."
Last month, it was reported that 60,000 orders have been placed under the scheme, suggesting it could boost car sales over the next few months.
Darren Winder, head of macro and strategy research at Cazenove, said the figures showed the outlook for new car sales was brighter than at the start of 2009.
"With over 9m vehicles estimated to be more than 10 years old, the scrappage scheme is likely to continue to support new car sales in the second half of 2009," Winder said.
But Howard Archer, economist at IHS Global Insight, warned that the UK economy might only get a limited boost from the £300m scheme, which runs until February 2010.
"There is a significant danger that increased spending by consumers on vehicles will come at the expense of spending on other big ticket items," he said.
"The benefit to the UK economy will also depend significantly to what degree the new cars purchased under the scheme are manufactured in the UK."
The SMMT's figures showed that registrations to private buyers rose for the first time since November 2007 in June, up by 3.9%. Small cars have enjoyed the biggest rise in demand, with the mini segment of the market growing by 145% compared with a year ago. The Ford Fiesta was the most popular model, with 9,822 sold, followed by sister car the Focus with 9,286, and Vauxhall's Corsa with 7,893 sales.
Sales of some larger cars fell sharply in June, though. The number of Bentleys registered dropped to 85, from 142 a year ago, while only a single Hummer was registered, compared with 42 in June 2008.
"There are some great deals out there for consumers to take advantage of and the good news is that they are buying smaller and more fuel-efficient cars, which can only be good news for the environment," said RAC motoring strategist Adrian Tink.
