Car manufacturers have been boosted by improvements in car production, which have been linked to the recent scrappage scheme.
The Society of Motor Manufacturers and Traders (SMMT) said production numbers are still 17.9% down on the figures from 2008, with 107,635 fresh vehicles being made in July this year.
But this is the smallest decline in production that manufacturers have seen in 2009 and it suggests that the car industry has weathered the worst part of the credit-crunch storm.
An increase of 2.4% in car sales across the summer months, owed largely to the Government's "cash for bangers" scheme has been attributed for lifting production levels.
However commercial vehicles (CV) production is still struggling, with a fall of 59.8% last month and the 2009 figures overall showing a huge 63.8% drop.
SMMT chief executive Paul Everitt said: "The slowdown in the rate of decline of UK car production reflects the impact of the scrappage incentive schemes in place across Europe.
"The UK motor industry is starting to stabilise but remains fragile. Industry needs the Government to deliver support through the automotive assistance programme and encourage banks to provide access to much needed finance and credit."
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