New car registrations rose by just 0.1% last month following unprecedented levels of growth in 2015 and a strong performance in the early parts of this year.
But the automotive sector was buoyed by results in several areas, including fleet purchases, alternatively-fuelled vehicles, and sales of popular models from big manufacturers.
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In the year to date, a total of 1,599,159 cars have been registered, putting demand 2.8% higher than for the same period in 2015.
New car buyers picked up 178,523 vehicles last month, with the figures showing there was an even split between petrol and diesel models.
Industry insiders have speculated that the downturn, which follows a strong first quarter, could have been prompted by uncertainty sparked off by Britain’s decision to leave the European Union.
SMMT chief executive Mike Hawes says it is essential that ministers start to take steps towards boosting the economy.
“After a healthy start to 2016 and record registrations in 2015, the market is showing signs of cooling,” he said.
“The automotive market is a vital part of the British economy and it’s important the government delivers the economic conditions which instill business and consumer confidence.”
The data also reveals that July followed a trend seen throughout the year in which lower private registrations were offset by fleet purchases, which increased by 5%.
And there was welcome relief in the sector, with sales of alternatively fuelled vehicles jumping by 24.7% compared to the same period in 2015.
It comes after research from campaign group Go Ultra Low revealed that sales of electric vehicles in the first half of 2016 had risen by a third.
Topping the list of bestsellers was the Ford Fiesta, of which 7,990 were registered on top of the 71,823 models sold during the year so far.
Vauxhall’s Corsa and Astra took second and third place respectively, with 5,606 and 4,939 units shifted.
Yet despite July’s disappointing figures, Mr Hawes suggested there was still cause for optimism.
“With low interest rates, attractive finance options and exciting new models coming to the showrooms, the market still has lots to offer customers.”