Car production still falling but scrappage schemes helping
UK car production continues to fall, but the rate of decline slowed markedly last month as scrappage schemes in Europe and the UK helped to stabilise a battered industry.
UK car production fell by 18% to 107,635 vehicles in July compared with July last year, the Society of Motor Manufacturers and Traders (SMMT) announced today.
Normally this would be an awful figure, but is actually the smallest monthly decrease this year. So far this year, output has been almost 46% down - at 518,375 - compared to the same period last year.
In the UK the cash-for-bangers scheme has helped to stabilise sales (July sales were even up by 2.5% on a year ago, although that is against a dismal figure a year ago). Moreover, scrappage schemes on the continent - which in several cases are more generous than the UK scheme - have stimulated UK exports and have helped slow the decline in production here.
Some 165,923 new vehicles have been made since the launch of the car scrappage scheme in April up to earlier this month, and the ã300m budget is enough to cover 300,000 cars.
At this rate, though, the UK scrappage scheme will run out of cash by the Autumn, at exactly the time when the VAT rate rises again. There is a good case for extending the scheme into the New Year and phasing it out so that the industry doesn't face a hard landing. This has already been done in France and Germany.
Moreover, the scrappage scheme is mainly benfitting producers of smaller cars. This helps some UK based producers such as Nissan, Toyota, Honda, Vauxhall and even the more up-market MINI. However, it does little to benefit the luxury producers where the UK has a huge presence (think Jaguar Land Rover, Aston Martin, Bentley, Rolls-Royce).
Much more could be done to help the industry - for example by making support available for the finance arms of car companies, and supporting exports through export credit guarantees. And the support for credit insurance has been heavily criticised (see the Post's excellent business bulletin video today).
Given the fragility of the industry still (we're still a long way off recovery), it amazes me still that the government has not done more. Remember that we have seen over 35,000 job losses in the car industry so far in the Uk this year.
Meanwhile, not a penny of the Auto Assistance Programme has yet to reach a single UK based producer. With GM about to decide the fate of GM Euroe, the government will have to act quickly to provide loans and/or laon gurantees to whichever firm acquires GM Europe. Let's hope it acts faster than it did with JLR.
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