The recent month-on-month growth in UK reported new car sales has provided a glimmer of sunshine amidst the current overcast economic outlook. However, the relative success of the UK’s automotive retailers is not being replicated in the other key European markets.
Whilst the UK dealership network’s sales are 2.7% ahead of the FY11 half year, there have been significant contractions, ranging between 8% and 20% over the first six months of FY12 in the Spanish, Belgian, French and Italian markets. Indeed, the UK has moved into second place, behind Germany but ahead of France, in respect of new car registrations for FY12. After a weak May, June has seen a recovery in Germany which overall is 1% ahead of FY11.
There are murmurings in UK dealership networks that ongoing European financial problems could undermine consumer confidence
This decline in continental Europe suggests that the financial uncertainty in the Eurozone is directly affecting new car sales. New car buyers in the UK have the confidence to make purchases on the basis that all indicators point to interest rates staying low with the added benefit of many attractively-priced products available to entice customers into dealerships.
That said, there are murmurings in UK dealership networks that ongoing European financial problems could undermine consumer confidence, especially when combined with the austerity measures which have been introduced in the UK. The second half of 2012 could be significantly more challenging to the automotive retail world if the uncertainty in the European markets continues.
The interesting result is in the Netherlands, where the approaching closure of the government’s subsidies for purchases of new low emission cars has stimulated a spike in sales 52% ahead of June 2011. While the subsidy has been in place for some time, the Dutch car buyer has clearly decided that it would be unwise not to take advantage of this centralised support.
The recent announcements by BMW, GM and Nissan underline the desirability of the UK as a manufacturing base
It is also of note that the French government recently announced it will not be introducing its own sales stimulus package for the wider automotive industry, preferring instead to provide incentives for research and development. Details of this have not yet been released, but the incentives can be expected to favour domestic OEMs. The French government suggests the introduction of a scrappage scheme similar to that introduced back in 2009/10 is of questionable value, with an initial boost in sales not being sustainable. Data showing new car sales in the Netherlands in July 2012 will either support or undermine the French government’s argument.
Vehicle manufacturers are tending to reverse the centralising of manufacturing facilities in low cost locations, focusing instead on their end markets. The robustness of the UK car market, the availability of quality Tier One and Tier Two automotive suppliers and the competitive nature of the UK tax structure are all encouraging OEMs to invest in their production facilities in the UK. The recent announcements by BMW in respect of the additional funds for its Mini production facilities, GM’s retention of Ellesmere Port, and Nissan locating its quick charging technology base in the UK, all continue to underline the desirability of the UK as a manufacturing base.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
David Raistrick is UK Manufacturing Leader at Deloitte
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