SMMT chief executive Mike Hawes commented: "Declining business and consumer confidence is undoubtedly affecting demand in the new auto market but this is being compounded by confusion over government policy on diesel".
The Society of Motor Manufacturers and Traders (SMMT) said faltering business and consumer confidence were partly to blame as new registrations dropped by 12.2% to 158,192 in October.
There were marked declines across all sectors, with business and fleet demand down -26.8% and -13.0% respectively. It's been a few months since the Ford managed to take the number one spot, but the all-new model looks to have put it back in the game.
AFV demand continued to rise, up 36.9% to 8,244 registrations, while petrol models enjoyed a more modest growth of 2.7%.
However, these gains were unable to offset heavy losses in the diesel segment, as continuing consumer concerns resulted in its biggest hit yet, with demand down -29.9 per cent.
New vehicle sales tumbled 12.2 per cent in October, marking the seventh consecutive month of declines and an acceleration on the fall of 9 per cent recorded the previous month.
"Declining business and consumer confidence is undoubtedly affecting demand in the new vehicle market but this is being compounded by confusion over government policy on diesel", said Mike Hawes, the SMMT's chief executive.
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The industry body said vehicle registrations dropped 12.2% year-on-year to 158,192 last month - the second double-digit decline this year.
Diesel sales tumbled by almost 30% in October following the scandal over rigging emissions tests and political rumblings over restrictions on diesel cars.
In total, new auto registrations - a proxy for sales - fell to 158,192 in October, the SMMT reported.
SMMT has attributed the drop in registrations to fears over potential bans for diesel cars from towns and city centres as local authorities respond to concerns over air quality. The SMMT forecast that the market would end the year at 2.56m vehicles - a 4.7% decline, with a further decline of 5.4% next year.
"We would expect to see this trend continue if the Government fails to intervene, so Mike Hawes has rightfully called for this problem to be tackled in the upcoming Autumn Statement".
Ministers are also considering funding measures to cut pollution with a tax on new diesel vehicles.