Demand for new cars fell by 7.3% last month, according to the Society of Motor Manufacturers and Traders.
Some 11,700 fewer cars new were registered in January than during the same month in 2019.
The SMMT blamed confusion over diesel and clean air zones, and weak consumer and business confidence.
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.
SMMT chief executive Mike Hawes said, “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.”