Record new car sales figures are masking troubled times for retailers, a new report reveals. PricewaterhouseCoopers says the UK bubble has burst for franchised dealers and expects the number of retailers to fall from 6000 to 4000 over the next 10 years.

Despite registrations exceeding 2.5m last year, PwC's Rob Hunt, says retailers face challenges from all directions.

“Margins are tight and sales have fallen away since the peak in early autumn of last year,” he says “The uncertainty caused by the implementation of the new block exemption legislation is creating a shadow over the sector.”

But Christopher Macgowan, SMMT chief executive, says industry expectations of a slowdown in the final quarter did not materialise. “Last year's new car market was marked by an important fact: sales smashed the 2.5m barrier for the first time,” he says.

The new car market hit a record high with almost one in 10 drivers getting behind the wheel of a new car last year and making the UK Europe's second largest carmakers. Figures from the Society of Motor Manufacturers and Traders show registrations for 2002 reached 2,563,631 – up 4.3 per cent on 2001.

Despite stock market and other economic uncertainties, December saw an upsurge producing 144,576 registrations and a 14.3 per cent jump over the same month in 2001. Following a 22 per cent hike in 2001, registrations by private buyers grew by two per cent last year to 1,236,766 units. December saw an eight per cent rise in private registrations. By the end of November, the UK market had registered 433,357 more new cars than France and 346,755 than Italy.

But the figures do not include cars imported privately or through outlets other than its member dealers, which has led some analysts to suggest the real total of new car registrations is closer to 2.75m. Diesel registrations rose by 38 per cent in 2002 to 602,623 units – 166,032 more than last year.