PwC says recession woes will knock the UK automotive industry in 2012

Audit and advisory giants PwC has warned of a worsening economic and employment prospect for the UK automotive sector in 2012.

December 2011 showed a 3.7% fall in new car registrations in terms of year on year figures. Overall 2011 saw a 4.4% drop in registrations compared with 2010. SMMT have said that this performance was in fact ahead of industry expectations but a slowdown in private registrations is considered to be particularly significant by PwC as an indicator of low consumer confidence. In 2011 private registrations accounted for just 42.4% of the UK market compared with 47.2% in 2010.

Michael Gartside, senior analyst with Autofacts, PwC’s automotive forecasting service said: “With the economic outlook deteriorating and unemployment forecast to increase further in 2012, we anticipate a 3% decline in new car registrations to around 1.88m units.

“Continuing economic uncertainty and the potential for an escalation of the eurozone debt
crisis, presents clear downside risks to this forecast.”

Becoming more optimistic however, Mr Gartside conceded that, “Assuming there is no further deterioration we could still see signs of improving demand within the second half leading to a full recovery in demand from 2013 onward.”

The UK is not alone in experiencing diminished car demand. The UK data collected by PwC forms part of the company’s monthly European car report and this has demonstrated clear links between the eurozone debt crisis and the levels of car registrations across the continent.  Year on year, registrations across the EU and those in the European Free Trade Association, (Iceland, Norway, Liechtenstein and Switzerland) show a fall of 1.5% to 13.56m units, which marks a fourth consecutive annual drop for the market. A further decline in 2012 is also predicted.

Gartside commented on the wider European picture for automotive manufacturers and retailers saying: “One market constraint will be the inability of most governments to stimulate demand via scrappage incentive schemes, seen in 2009 and 2010, which is one reason why we expect the European market to fall again, by 5% to just under 12.9m units in 2012.”