Car industry in 2010

Posted on 18 Jan 2010 by The Manufacturer

Howard Wheeldon says the automotive industry is likely to continue to face challenging circumstances in 2010.

As nothing can hide the miracle nature of UK car sales hitting just short of two million units last year it probably doesn’t matter a jot whether car industry body, the Society of Motor Manufacturers and Traders (SMMT), is satisfied with 2009 sales performance or not. What does matter though as we begin to creep into 2010 is that before we start congratulating the industry on how good sales had in the end been (particularly compared to what many of us thought likely at this time last year as we envisaged that in relative terms 2009 might well be worst year for car sales in living memory) no one in the industry should lose sight that without the huge benefit the industry enjoyed due to the government scrappage scheme the situation we might have been looking now at an industry in terminal decline. Thank heavens for small mercies then and that rather than the 1.5 million cars that the industry might just have managed to sell at a pinch during the year we ended up registering no less than 1,994,999 units.

With the scrappage scheme likely to end some time in February we suspect that overall sales for the full year are likely to dip back to around 1.75 million. Given the depth, extent and likely protracted nature of UK economic performance anticipated plus the debt and budget related reasoning a reduced figure such as this should better be seen as more than reasonable under the circumstances. If there is any potential for good news it is that we suspect following two very poor years’ that fleet sales will increase during 2010. If that is proved to be right we suspect it may take some of the sting away from the loss of the car scrappage scheme during 2010. Overall and although likely to be down on 2009 due to the likely ending of the car scrappage scheme we suspect the outlook for current year car sales in the UK would better be defined as subdued as opposed to likely to be sharply down. We will have to wait and see. From an employment aspect we suspect that the small decline in sales that we project will make little if any difference. However, we would point out that despite market weakness there is far less room for price discounting this year due to the effect of continued weakness in sterling on imported cars and the rise in VAT in the UK.