He said Government plans to ease traffic congestion by imposing a range of short-term fiscal measures were now inappropriate.

Mr Rushworth said sales of vehicles in the territory had been falling since 1992 when 61,000 units were sold. Last year only 53,000 units were sold.

He said the association expected sales for this year to be about 40,000.

He said the Government based its strategy on the flawed assumption that the number of first registrations would remain constant.

Mr Rushworth said the association expected the total car population in Hong Kong to fall from 286,000 cars this year and then to 266,000 in 1998, even without the proposed tax increases.

If the Government imposed the planned 70 per cent first time registration charge then the decline in total cars would be significantly higher.

Mr Rushworth said the association intended to keep pressure on the Government.

'We will be reminding the Government that the marketplace is suffering from a serious downtrend in which motor traders have had to make redundant about 400 people over the last two months and will perhaps lay off as many as 1,000 people by the end of the year,' he said.

'Now that registrations are less than cancellations there is no necessity for the government to consider financial restrictions and instead it should now get on with system control.' He said the association had presented the Government with a set of alternatives to control traffic congestion two months ago but had not had any response.

A spokesman for Transport Secretary Haider Barma said he considered that an increase in car registration was still necessary.

She said Mr Barma had decided that the percentage of the passenger car growth should be limited and some increase was inevitable.