New car registrations have plunged to their lowest level in over two decades.

The UK automotive sector suffered its worst March since 1998, when the two-plate system was introduced, with registrations declining by 14.3 per cent year-on-year to 243,479.

Around 20 per cent of total annual registrations are usually recorded in the new numberplate month and The Society of Motor Manufacturers and Traders (SMMT) has expressed concerns about what it means for the year ahead.

Mike Hawes, chief executive of the SMMT, said: "This performance is deeply disappointing and lays bare the challenges ahead."

He said the decline illustrated the severity of the global semiconductor shortage, which could be affected further by the Ukraine crisis and was leaving manufacturers striving to deliver the latest, lowest emission vehicles to customers.

He added: "With increasing household and business costs, government must do all it can to support consumers so that the growth of electric vehicles can be sustained, and the UK's ambitious net zero timetable delivered."

The semiconductor shortage is also affecting the UK's new van sales , which dropped to 40,000 units in March amid supply issues.

Sales of new light commercial vehicles were down 27.6 per cent year-on-year.

Registrations of large vans, which represent more than two thirds of the new LCV market, were down 18.9 per cent or 6,802 units on March last year.

Medium-sized vans sales were down 27.6 per cent or 2,122 units and small vans saw a 70.8 per cent drop or 2,186 units.

Mr Hawes said : "The light commercial vehicle market has made a slower start to 2022 compared with the first quarter of last year, reflecting the cyclical nature of fleet operator investment, amid global supply shortages and increasing economic pressures.

"Targeted support from government is needed to encourage fleet renewal and a full zero emission van market. The expansion of the Plug-in Van Grant will be a positive for the sector, but equally there needs to be a greater roll-out of suitable chargepoints to ensure fleet and self-employed van operators in all regions can make the transition."

Meanwhile German carmaker Volkswagen will axe many combustion engine models by the end of the decade and sell fewer cars overall to concentrate on producing more profitable premium vehicles, its finance chief was quoted as saying on Wednesday.

"The key target is not growth," Arno Antlitz told the Financial Times newspaper. "We are (more focused) on quality and on margins, rather than on volume and market share."

Antlitz said VW would reduce its range of petrol and diesel cars, consisting of at least 100 models spread across several brands, by 60% in Europe over the next eight years.