Society of Motor Manufacturers and Traders (SMMT) figures show fleet and business new car registrations dropped by 4.7% during 2017.
The new car market was down 5.7% after 152,169 fewer cars were sold during the year compared to 2016.
The SMMT figures indicated that fleet and business registrations accounted for the majority of sales, at 1,416,757 (55%) of the 2,540,617 total – representing a decrease of 67,779 from the 1,486,536 registered in 2016.
The retail market also showed a decline, down 6.8% with 1,123,860 cars sold compared to 2016’s 1.2 million.
Overall new car registrations remained high, with the market maintaining its position as the second largest in the EU after Germany.
Mike Hawes, SMMT chief executive, said: “The decline in the new car market is concerning but it’s important to remember demand remains at historically high levels. More than 2.5 million people drove away in a new car last year, benefitting from the latest, safest, cleanest and most fuel efficient technology.
“Falling business and consumer confidence is undoubtedly taking a toll, however, and confusing anti-diesel messages have caused many to hesitate before buying a new low emission diesel car.
“Keeping older vehicles on the road will not only mean higher running costs but will hold back progress towards our environmental goals.”
Diesel sales were among the hardest hit in 2017, showing a year-on-year decline of 17.1% – a fall in units sold by 219,309. This decline coincides with a 0.8%, rise in carbon tailpipe emissions in the UK, the first rise on record after years of consecutive improvement since 1997.
Hawes said: “Diesel cars, due to their greater fuel efficiency, typically emit on average 20% less CO2 than the equivalent performance of a petrol-engined vehicle. It’s disappointing, therefore, to see these advances undermined by the backlash against cleaner, low emission diesels, with the recent drop in sales the prime cause of this increase in CO2 emissions.
“New technologies, including the latest low emission diesels, are vital if the country and the industry are to meet their climate change targets.
“For the industry, hitting the 2020/2021 goals will be extremely challenging and Government must create the right policies and incentives to encourage all low emission vehicles irrespective of fuel type, whether that means battery vehicles, hybrids, plug-in hybrids, hydrogen or petrol and diesel models.”
There was positive news from the alternative fuel market, meanwhile, with a record number of hybrid, plug-in electric and hydrogen fuel cell cars registered (growing 34.8% and taking its largest ever annual share of the market at 4.7%).
Britain is becoming established as a key market for alternatively fuelled vehicles, with UK demand growing by one quarter in 2017 and consumers purchasing more plug-in cars than anywhere in Europe.
Ashley Barnett, head of consultancy at Lex Autolease, said: “It’s not surprising to see a continued fall in registrations, particularly in light of the publicity around emissions, introduction of Clean Air Zones and changes to government policy around the future taxation on company cars. Despite this, we experienced strong growth within the SME market last year.
“We expect to see a decline in overall registrations in 2018 as consumers look for clarity around future economic plans and environmental strategy. Despite the rise in average CO2 per new car last year, we predict adoption levels of ultra-low emission vehicles (ULEVs) will rise in the year ahead as consumers review fuel type in their vehicle choice.”