Britain’s biggest car dealer has urged the Government to cut taxes on petrol after revealing that consumers are steering clear of garage showrooms.

Trevor Finn, the chief executive of Pendragon, said that Alistair Darling, the Chancellor, had to kick-start demand because it was evident that motorists were buckling under record pump prices and rising green taxes on older vehicles.

After an encouraging start to the year, Mr Finn said, the sales of new cars to the public fell by nearly 10 per cent across the market in May. Shares in the group, which operates 350 car dealerships under the Evans Halshaw and Stratstone brands, plunged by 23 per cent to an eight-year low of 15p as it said that it was impossible to forecast profits for the current year.

About 500 jobs have been cut throughout the business, whose market capitalisation is £98 million. Two years ago it paid £500 million for the Reg Vardy chain.

Mr Finn said: “There’s been a pause on the demand side. It isn’t in any particular segment, not just on small, big or sports cars. The market has stepped down a gear. We think that is probably it, now. We’re likely to see similar numbers in June and there is no reason for us to believe the market is going to pick back up.

“In the early part of this year, I would have said interest rates were my main concern, but now it’s the price of fuel. The Government says it cannot do anything about interest rates, but if they had the will they could do something on petrol. We need them to be more proactive.

“They’re in power to govern, aren’t they? Reducing the tax take on a gallon of fuel would touch everyone.”

Petrol prices have soared on the back of the spiralling price of crude oil. Last week diesel broke through the £6-a-gallon mark. The average two-car family is spending about £45 more at the pump each month than a year ago.

The Society of Motor Manufacturers and Traders said recently that the slowdown in the wider economy was showing in the car market and that it expected a tough year ahead.

The Pendragon warning came two weeks after Citigroup and Arden, the house brokers, cut their profit forecasts for the group by 20 per cent, blaming a decline in the sales of new cars and customers’ economising.

Pendragon sells a range of models from Fords to Aston Martins. Inchcape, a rival dealership, said last week that domestic demand was slowing after what it called a buoyant April.

Mr Finn insisted that the petrol price was the biggest factor in the downturn in consumer demand but said that the credit crunch had made car financing slightly more expensive.

Mike Allen, a Panmure Gordon analyst, said that Pendragon’s pretax profits were likely to fall to £38.8 million, compared with £47.3 million last year. However, he added: “While we downgraded our forecasts earlier this month in anticipation of poor trading in May and June, we do not have much confidence in these at the minute and they could prove now best case.

“We are expecting a more difficult second half in the new and used car market and therefore more cost-based initiatives may be required in order for Pendragon to hit our numbers.”

Downsizing

Top five sellers from January 1 to May 31 and change on previous year

Ford Focus 52,887 (-18.4%)

Vauxhall Corsa 44,931 (+8.7%)

Vauxhall Astra 44,822 (-10.5%)

Ford Fiesta 42,895 (-9.7%)

VW Golf 30,476 (+3.8%)

Source: Society of Motor Manufacturers and Traders

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