Car production tumbled again in July but not as fast as in previous months, as drivers traded in old bangers in the Government's scrappage scheme.

The Society of Motor Manufacturers today said 107,635 cars were made last month, down 17.9% on July last year. It was the smallest decline of the year so far.

It came as industry chiefs called on Business Secretary Lord Mandelson to extend the cash-for-bangers scheme under which the Government gives £1000 and manufacturers another £1000 to drivers trading in 10-year-old cars for new models.

“The slowdown in the rate of decline of UK car production reflects the impact of the scrappage incentive schemes in place across Europe,” said Paul Everitt, SMMT chief executive. “The UK motor industry is starting to stabilise but remains fragile.”

Car production so far this year is down 45.8% on 2008 at 518,375.

“It probably won't be until the very end of this year, possibly into 2010, that we start to see growth,” said the SMMT's Nikki Rooke. “Over the year to date we are still down nearly 50% and that's a considerable amount that needs to be made up.”

So far 155,000 cars out of a possible 300,000 have been bought under the scrappage scheme.

Car sales around the world have collapsed as a result of the recession plunging manufacturers into crisis. Other countries have also introduced scrappage schemes although the US deal ends on Monday.