By Marcus Leach

Weak economic growth, coupled with a glum consumer mood, has hit the UK car industry as sales fell 3.5% in July.

Data released by the Society of Motor Manufacturers and Traders (SMMT) revealed that new car registrations fell to 131,634 units last month, which marks the 13th successive monthly decline.

However, total 2011 sales are still expected to reach the forecast of just under 2 million.

"While the coming months remain challenging, performance in the second half of 2011 is expected to keep the market on course to reach around 1.93m units," Paul Everitt, the SMMT chief executive, said.

Mr Everitt went on to say that one of the few positives of the latest figures was an increase in demand for company bought vehicles.

But overall sales are down 6.7% in the year to date, partly because private demand no longer has the support of the government-backed scrappage scheme introduced in 2009.

John Leech, an automotive expert at KPMG, believes that overseas sales growth will help cushion UK manufacturers deal with the decline in domestic demand.

"Private retail buyers are continuing to defer their purchase or buy used cars instead. However, UK manufacturers are equipped to survive this trend by exploiting strong export demand as foreign investment pours in," he said.

"Vehicle manufacturers are set to face a 'twin-speed' global market for decades to come, with growing far east markets and sluggish western markets. As demand from domestic consumers drops, China's luxury auto market is set to grow notably in the next two to three years. China's car market will expand and approach a penetration rate in line with other developed markets over the next 50 years, so there's a real long-term source of growth on which to base investment decisions."

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