UK automotive industry expert Professor Garel Rhys says that the UK vehicle market will not return to pre-recessional levels until 2016 if the UK economy is hit by a double-dip recession.
Prof Rhys says that this is increasingly likely, with negative growth likely in 2012 and matters in the UK and European Union likely to get worse before any recovery.
He also says that the apparent stability of the UK car market that returned around 2m sales through 2009-2011 is a mirage – and is, in fact, a result of the company car sector deciding that it could not extend the replacement cycle any further.
Rhys warns that this was a one-off that will not be repeated in 2012 – and also says that significant discounting by manufacturers cannot continue.
“Various firms had their own reasons for doing so: Vauxhall wanted to retain the position of the UK as General Motors’ fourth largest world market by staying ahead of Opel’s sales in Germany; Jaguar Land Rover wanted to make and sell 300,000 units in a given year for the first time; Nissan wanted to exceed the production record they reached in 2010 and Mini wanted to use its wider range to really claim a larger part of the UK market.
“This cannot go on and in 2012 the adverse economic conditions will seriously undermine the UK car market. If the “special" conditions had not existed in 2011 the market would have done well to reach 1.85 million units. It is likely that 2012 will be a reality check with car sales struggling to reach 1.8 million.
“The industry needs to batten down its hatches."
UK car exports
Prof Rhys says that UK car production could benefit from exporting to markets outside the EU. Over 75 per cent of all UK car production is exported and car production could continue to increase from 1.25m in 2011 to around 1.4m in 2012. But Prof Rhys sounds a note of warning:
“Unfortunately this may not be enough to stabilise employment as the cull of jobs in the auto supply sector shows no sign of ending. In 2000 the UK automotive industry employed 258,000 with 131,000 in the vehicle firms and 127,000 in suppliers. By 2010 the total had fallen to 135,000 with 82,000 in vehicle and engine making and only 53,000 in the suppliers.
“In 2011 there were signs that employment in the vehicle firms had stabilized but had fallen another 5,000 in the suppliers. It is inevitable given the economic signals that conditions are going to be tough in 2012.
Rhys predicts that, following several lean years, by 2016 car production in the UK will have surpassed all previous records and will be well north of two million units.