UK car production fell 31.5% in August from year-ago levels, SMMT data showed.
There were 56,737 cars made last month. But at 19,173, the number of cars built for the UK market reached a near five-year high as the car scrappage scheme boosted sales.
The SMMT called for the scheme, which was introduced in May, to be extended, saying recovery was still fragile.
The drop in production was bigger than the 17.9% fall seen in July, but many car plants extended summer shutdowns in August.
“The scrappage incentive scheme has had a positive impact on car production with one in three cars built in the UK last month for the home market and total volumes starting to stabilise,” said SMMT chief executive Paul Everitt.
“However, underlying demand remains weak and the recovery is still extremely fragile. A continuation of the scrappage incentive scheme through to the original close date of 28 February 2010 would help to sustain growth and bridge uncertainties associated with the ending of the VAT [sales tax] discount.”
Cars built for export were down by 37%.
The number of commercial vehicles produced fell by 48.5%, although this was the smallest drop of the year.
The SMMT said the continued fall in commercial output reflected “ongoing weakness” in the market.