Sales of diesel cars have continued to drop significantly, with the first figures of 2018 showing a 25% fall from last January.

Overall, the UK’s new car market declined by 6.3% in January with 163,615 cars leaving showrooms. It follows a downward trend that started last April after years of record growth.

The Society of Motor Manufacturers and Traders said the decline in diesel sales was concerning, although dealers said the figures were “an expected correction”.

Sales of petrol cars rose by 8% as consumers switched away from diesel, sending market share down to 36% of new vehicles, as the extent of the air pollution crisis has become evident and government raised tax on vehicles not meeting the latest emissions standards.

Electric and other alternative fuel vehicles continued to expand their sales rapidly, albeit from a small base, with just more than 9,000 sold in January. Sales of SUVs also rose by 6.6%.

Business purchases of vehicles fell by almost 30%, possibly affected by tax changes in the budget.

British factories are still largely invested in diesel technology that had been backed by government for greater fuel efficiency, before the extent of rigged emission tests and urban air pollution became clear.

Last year, more than two in five of the cars leaving British production lines were diesels, as well as more than 1m engines, which the SMMT said directly supported about 3,350 jobs.

The SMMT chief executive, Mike Hawes, said: “Given fleet renewal is the fastest way to improve air quality and reduce CO2, we need government policy to encourage take-up of the latest advanced low-emission diesels as, for many drivers, they remain the right choice economically and environmentally.”

The director of the National Franchised Dealers Association, Sue Robinson, said: “The sector performed exceptionally well in the first quarter of 2017, meaning the decline reflects an expected market correction.

“Franchised dealers continue to see a buoyant market on the used car side.”