Society of Motor Manufacturers Traders' chief executive Christopher Macgowan welcomed this week's prices statement by Stephen Byers, saying it would end months of uncertainty.

The Secretary of State for Trade and Industry said measures to cut the average price of a car by £1,100 “and save car buyers around £1bn a year” would come into force on September 1, coinciding with the plate-change letter from W to X.

Mr Byers said the new legal order would bring about greater competition in the supply and sale of cars.

Mr Macgowan said the SMMT had worked closely with the DTI to make the order as clear and unambiguous as possible. “We are pleased the Secretary of State has once again confirmed his findings that the price of new cars in the UK has been falling for some time,” he said.

“It is clear that commonsense has prevailed at the DTI and it has implemented some demanding but ultimately workable legislation.

“The motor industry can now work quickly to ensure this new legislation is implemented and that consumers buy new cars with confidence.”

Automotive Management surveys have revealed dealers hold manufacturers responsible for what, in the Government's view, have been inflated prices. Mr Byers has not accepted carmakers' protests that UK transaction prices were roughly in line with those throughout the EU.

Up to now, carmakers have left it to the SMMT to make statements about the prices issue, but now individual bosses are likely to comment.

Key points in the order relating to carmakers will stop them from - offering dealers fleet bonuses on outright volume purchases; discriminating over whether the user is a private or fleet customer in giving discounts to contract hire firms; altering supplies because of a dealer's advertised resale prices and refusing to supply dealers on the grounds of the number of cars they are preregistering.

Mr Byers will order manufacturers to publish information about the number of cars they have pre-registered. Sales of cars obtained from franchised dealers in other EU countries count towards dealers' annual sales targets. This is because dealers' sales performances affect whether they keep franchises.