New car sales fell for the first time in six years last year, with demand for diesel cars plunging by almost a fifth.
In total, there were about 2.5 million cars registered, according to industry body the Society of Motor Manufacturers and Traders (SMMT).
Overall sales fell 5.7% on a year-on-year basis, with demand for diesel vehicles showing a pronounced decline of 17%.
Petrol registrations fell by 2.1% in December, but were up 2.7% for 2017.
CO2 emissions from new cars increased for the first time in 20 years, up 0.8% on 2016.
SMMT chief executive Mike Hawes said the drop in diesel sales was “the prime cause” of the rise in CO2 emissions and that the latest low-emission diesels were “vital” in meeting climate change targets.
He said he expected car sales to continue to drop this year, predicting a 5% to 7% fall.
“We need to put it into context. This was still the third best year in a decade and the sixth best ever,” he added.
Mr Hawes said that confusion about the future of diesel had fuelled a backlash against diesel cars.
In the plans, Chancellor Philip Hammond said a one-band increase in the first-year vehicle excise duty (VED) rate is set to come in to place for models which don’t comply with RDE2 criteria – amid wider plans to ban the sale of all new conventional diesel and petrol cars by 2040.
Hawes said: “Confusing anti-diesel messages have caused many to hesitate before buying a new low emission diesel car.”
He added that mixed signals have left consumers “just sitting on their hands” instead of opting to choose an alternative vehicle.
He said the “very, very volatile year” was prompted by “a drop in both business and consumer confidence” – adding continuing uncertainty over Brexit has dragged down manufacturer confidence.
Mr Hawes warned there could be further problems ahead if a decision fails to be reached as manufacturers put “contingency plans” in place which could potentially harm UK operations funding.
The market share of diesel vehicles has fallen by 6% since last year to hold around 42%, with alternatively-fuelled cars up to a record 4.7%.
Mr Hawes insisted that despite the falling figures, 2017 marks the third highest year for car registrations over the last decade with record numbers reported from 2015 and 2016.