UK Sales rose by 2.4% in July compared with the same month last year, the first rise since April last year, latest industry figures have shown.

The number of new cars sold in the UK during the month was 157,149, said the Society of Motor Manufacturers and Traders (SMMT).

It attributed the rise to the scrappage incentive scheme, worth £2,000 a car, which came into effect in May.

Sales so far this year are still down 22.8% on the same period last year. 

Carmakers across the world are struggling with falling sales amid a global recession.

Under the UK scrappage scheme, a £2,000 incentive is paid to motorists who scrap cars registered before the 31 August 1999 to buy a new car.

Half of the money is paid by the government and half by the car industry.

"The impact of the scrappage scheme is clear and we are encouraged by the impact it has had, increasing new car registrations for the first time since April 2008," said Paul Everitt, the SMMT chief executive.

The scrappage scheme boosted sales of smaller cars, such as the mini segment, whose registrations more than trebled in July from the same month last year.

The industry body said that 33,026 cars were sold through the scrappage scheme in July, roughly one fifth of all registrations in that month.

The Ford Fiesta remained the best-selling car in July, as it has been for eight of the past nine months.

Long road ahead

However, sales are still far lower than they were this time last year.

July's sales were 10.4% higher than the SMMT's forecast for the month, but still 10.1% lower than the July average between 1999 and 2008 of 174,879.

Registrations to private buyers rose 33.4% in July to 77,911 but fleet purchases were down at 72.014.

The SMMT also warned that the money for the scrappage scheme could run out in the next few months. "We are expecting end of October, early November, the full amount of funding will run out," Nikki Rooke of the SMMT told the BBC.

"Industry still faces a long road to recovery, " said Mr Everitt, calling on government to ease access to finance and credit and deliver loan guarantees.

Car sales are expected to fall 14.4% to 1.825 million units this year and a further 5%next year to 1.73 million units.  

Source: BBC News website - business section 06th August 09