Paul Everitt, SMMT chief executive said:
"The Society of Motor Manufacturers and Traders supports the substantial, but temporary, economic stimulus package announced in the pre-Budget report.
"It provides positive incentives for consumers to begin spending, but will need to be accompanied by a more active approach to lending by banks and financial institutions.
“The chancellor has made a positive first step to help restore consumer confidence and kick-start responsible spending.
"We now need to see action to remove the constraints on credit and finance so consumers and businesses can take advantage of the changes announced today.
“The 2.5% cut in VAT combined with the recent cuts in interest rates will encourage consumer spending, impacting on both the new and used vehicle markets.
"Any move to boost responsible spending is welcome but specific action to improve the affordability and accessibility of credit is needed if the vehicle market is really going to benefit.
“Now is not the time to be increasing motoring taxes so the scrapping of penal increases to VED is welcome.
"We are disappointed the chancellor hasn’t taken the opportunity to reverse his plans for a first year rate of VED and would urge government to reconsider its approach to vehicle taxation policy, aligning it to EU CO2 legislation and providing a more consistent and long-term framework.
“The motor industry faces a set of unprecedented market conditions.
"The dramatic fall in demand for new vehicles around the world, combined with the limited availability of funding and liquidity now puts at risk valuable industrial capability.
"Urgent action is required to boost demand for new vehicles and ease pressure on UK automotive suppliers."