But despite declining car sales in the UK in 2011, car output in he UK over the last year has risen. While we're still waiting for 2011 production figures, total UK car output for the year is expected to be up by some 6 to 10% on 2010. Output had anyway risen by some 27% the year before, in 2010, to 1.27 million units. That's very good news - but do remember that the recent boost has been off a very depressed 2009 output figure.

And let's bear in mind that output of say 1.4 million in 2011 remains well below pre-crisis levels of around 1.65 million units in 2008. Go back to 1999 and the figure was 1.99 million. So despite this recent bounce-back, there's still some way to go before the industry gets back to where it was a decade ago.

This recent output growth despite stagnant/falling sales the UK given austerity at home, and is indicative of the underlying strength of the UK industry and its remarkable export performance, boosted by a 25% depreciation of sterling from peak to trough which - for now at least - has made the UK's exports very competitive.

And manufacturers are being boosted by rapid growth in emerging markets like China and Russia where demand for premium products like Range Rovers is rising rapidly as a new middle class is able to show its wealth. Britain, as the second largest premium car producer in the world, is well placed to exploit this demand growth as long as the sterling depreciation doesn't unwind too soon.

Keeping sterling at a competitive level is critical in this regard. On that, the danger that the Bank of England might raise interest rates appears to have passed for now at least, and instead we have seen more printing of money (QE) to stimulate the economy. That has the added benefit of keeping interest sterling low - unless that is the eurozone implodes.

The key messages from all this?

Firstly, while the UK can't compete at the low end of car assembly anymore, it can still do very well in terms of premium cars, high design content vehicles like the Nissan Qashqai and the MINI at Oxford, engines, and in new clean technologies like electric cars (witness as well Tata beginning assembly of its electric car in Coventry). As well as course in the top-end markets that JLR, Rolls Royce and Bentley competes in.

Secondly, 2012 is going to be a challenging year for the industry with austerity and stagnating economies in the UK and eurozone. However, the push by UK based exporters like JLR further afield (think China and India) offers hope for continued output growth.

Thirdly, getting growth in the economy going and avoiding a eurozone break up (with the huge uncertainty over exchange rates this would involve) are critical for helping the industry here to continue recovering.

Forthly, while everyone's been talking about 'rebalancing' the economy towards manufacturing and exports, the auto industry just been getting on with it, with announcements of big investments in the car industry in the UK during 2011 and the future.

Maximising the benefits of this investment for the domestic economy through local sourcing, however, needs a bigger effort on plugging skills gaps, enabling the supply chain to get access to finance, and helping exporters.

Organsiations like MAS are already doing much good work in this area, but continued growth needs a supportive set of policies to help businesses take advantage of the opportunities now on offer.

As I pointed out in a blog yesterday, forget 'picking winners', rather think of 'backing winners', as that is very much what the auto industry here already is.

Professor David Bailey works at Coventry University Business School.