Land Rover saw its sales go into sharp reverse last month amid signs that the credit squeeze, falling house prices and growing economic uncertainty are hitting the luxury car market.

The Solihull off-road specialist, now owned by Tata Motors of India, has enjoyed three years of record sales both in the UK and overseas thanks to the success of new models such as the Freelander and Range Rover Sport.

But registrations fell by 33 per cent to 2,518 units in May and by eight per cent to 18,929 for the first five months of the year, according to official figures.

New registrations of 4x4s fell by 18 per cent overall compared with May 2007, the Society of Motor Manufacturers and Traders, which compiles the figures, said.

Some competitors interpreted the decline as signalling that high fuel prices and changes to vehicle excise duty (VED) are turning motorists away from 4x4s. But Land Rover pointed out that most luxury carmakers had a tough time last month. It also stressed that the SMMT figures omitted sales of commercial variants of some of its models. Adding those back into the total cuts the monthly fall to about 26 per cent.

“May last year was a very strong month, up 11 per cent on the same month in 2006, and it also had one more selling day than year,” a Land Rover spokesman said. “The ‘07 spec Defender was still getting into its stride and the automatic gearbox diesel Freelander had just become available.

“Now, we are seeing premium sector being hit by a lack of consumer confidence, the credit squeeze and an uncertain economy. We anticipate that it is going to be tough in the UK and and US this year and we are shifting production to meet growth in emerging countries such as China, Russia and Brazil.”

May was a strong month for Jaguar, Land Rover’s sister company, thanks to demand for the new XF saloon car.

UK sales rocketed by 64 per cent to 2,058 units, driven mainly by the popularity of the XF. Year to date sales for Jaguar rose by ten per cent to 9,537 units.

Big increases in road tax for “gas-guzzling” vehicles such as 4x4s have been the subject of much debate of late at a time when petrol and diesel prices at the pumps are at record highs.

The 4x4 dip in sales contributed to an overall drop of 3.5 per cent in total new vehicle registrations last month.

The May 2008 total was 179,272 and represented the first monthly fall since February - the dip following two months of growth that surprised the motor industry.

Demand for private cars fell by 9.5 per cent last month, while business car sales were down even more - by 15.4 per cent.
Sales of mini-sized cars soared 120 per cent last month, however.

Although diesel now costs about 130p a litre, sales of diesel-powered cars still rose by 8.4 per cent last month.

SMMT chief executive Paul Everitt said: “The slow-down in the overall new car market in May comes as no surprise and reflects concerns across the economy.

“The figures are in line with our forecasts for 2008, and we expect a tough year ahead. Vehicle manufacturers and dealers will have to work hard to attract consumers, who are facing increasing household and motoring expenses.”

Sales of BMW’s British-built Mini fell by nine per cent to 3,429 units and were just over one per cent off at 18,876 for the year so far.
And Toyota, which has recently been snapping at the heels of General Motors, saw its UK sales fall in May and over the first five months of the year by 19 per cent and nine per cent respectively.