Demand for new cars fell by 7.3% last month, the automotive industry has said.
Some 11,700 fewer cars new were registered in January than during the same month in 2019, according to the Society of Motor Manufacturers and Traders (SMMT).
The trade association blamed confusion over diesel and clean air zones, and weak consumer and business confidence.
The decline was driven by a 13.9% drop in demand from private consumers.
Sales of diesel and petrol models were down 36.0% and 9.5% year-on-year.
Alternatively fuelled vehicles reached a record market share of 11.9% in January, up from 6.8% in the same month last year.
This included demand for plug-in hybrids more than doubling, and triple the number of pure electric cars leaving showrooms compared with January 2019.
Transport Secretary Grant Shapps claimed the figures show Government investment is “powering the electric transition across the UK’s roads”.
On Tuesday, Prime Minister Boris Johnson announced plans to bring forward a ban the sale of new petrol and diesel cars by five years to 2035.
SMMT chief executive Mike Hawes said: “The new car market is a key driver of the UK’s overall economy, so another month of decline is unsettling.
“Consumer confidence is not returning to the market and will not be helped by Government’s decision to add further confusion and instability by moving the goalposts on the end of sale of internal combustion engine cars.
“While ambition is understandable as we must address climate change and air quality concerns, blanket bans do not help short-term consumer confidence.
“To be successful, Government must lead the transition with an extensive and appropriately funded package of fiscal incentives, policies and investment to drive demand.
“We want to deliver air quality and environmental improvements now but need a strong market to do so.”
Karen Johnson, head of retail and wholesale at Barclays Corporate Banking, said: “Dealerships across the country will be bitterly disappointed with this year-on-year decrease in January car registrations.
“Since the election result in December, the market has been increasingly optimistic about an increase in consumer spending on big ticket items. However, this latest set of data shows we’re not there yet.
“Negotiations around the UK-EU trade deal will be key to the industry’s long-term prospects.”