The UK car market was up by almost 30% year-on-year in January with the rise seen as exceeding expectations. 

The January car market rose by 29.8% reaching 145,479 units. It was the second successive month of growth, though a decline for the UK car market in 2010 is widely forecast as the UK's scrappage scheme ends.
The SMMT said that the scrappage scheme continued to boost the market in January, accounting for 17.8% of sales, despite the return to 17.5% VAT and a cold snap that is thought to have depressed showroom traffic.

"The 29.8% increase in January new car registrations provides a better than expected start to 2010 for the UK motor industry," said Paul Everitt, SMMT chief executive. 

"Scrappage continues to lift demand successfully and today's announcement of a continuation of the scheme to the end of March will allow the maximum number of people to benefit from the budget that's still available.

"Industry expects another difficult year with the availability of finance, consumer confidence and sustaining demand post-scrappage, key to performance in the second half of the year, but signs of recovery in the fleet and business sectors are encouraging," he added.

The scrappage scheme remains a positive influence on consumer demand and its continuation into March (it has just been announced that it will be extended - though with no additional funding) will ensure that the maximum number of people can benefit from the budget available, the SMMT said.

As the impact of the scheme subsides the market is expected to slow to 1.817 million units over the full year - the lowest level since 1993 and around 10% down on 2009. Volumes are expected slowly to recover to over two million by 2012, the SMMT maintains.

On the retailers' side, Sue Robinson, RMI director, cautioned on the fragility of fleet sales.

"The scrappage scheme has tempted private buyers back into the new and used car market. However, the business market is still fragile with many fleet and business operators delaying the replacement of vehicles, though a few 'green shoots' have been seen in January," she said.

She added that the outlook for 2010 is set to be challenging with a level of uncertainty being caused by the imminent general election. "It is likely that tax rises, public spending cuts and the end of the scrappage in March will make consumers more cautious in their spending, certainly in the shorter term, " she said.

Consultants Deloitte hit an upbeat tone, describing January's market as positive and noting that the scrappage extension is 'superb' news.

David Raistrick, UK Manufacturing Leader at Deloitte said: "January's new car registration figures are positive news for the automotive sector as they climb back to the numbers enjoyed two and three years ago. Today's figure of 145,000 is a significant jump from last year's 112,000 and is more in line with January 2008 and 2007 where January registration numbers were over 160,000.

"The extension of the scrappage scheme is superb news for the industry giving buyers the chance to use up all the available funding. I would expect further increases in February and March as buyers look to take advantage of the scrappage extension as well as racing to get new registration plates in March."

However, he also noted that there is a need for fleet sales to grow to take the market closer to 2m units annually.

"For the industry to balance the decrease in private sales as scrappage ends, the corporate car market must grow. Looking at total registration figures over the past two years, the number of corporate cars has decreased from 58% to 49%, while private demand has grown thanks to scrappage. If, as UK businesses pull out of recession, corporate and fleet registrations increase this will help take this figure closer to the long term average of 60% of total sales. This could help boost total annual numbers to the upper end of the forecasted registration figure of 1.8-1.9 million."