Abstract
The UK automotive industry awaits a scrappage scheme similar to those in
Germany and France to
bolster demand in the market. Meanwhile, as examined
by BMI in its latest UK Automotives Report,
demand for used cars has
increased by nearly 20% year-on-year (y-o-y) in January thanks to an
industrywide
drop in the price of used motors, mainly in the compact MPV
segment.
The industry has emerged as one of the worst-affected markets in
Western Europe, alongside Italy and
Spain, after fall of just over 28%
y-o-y in new car registrations, down to 166,446 units, in the first two
months of this year. This comes on the back of constrained liquidity in the
market and indicates that the
government’s VAT cut in November has
not brought any significant relief. This has prompted the Society
of Motor
Manufacturers and Traders (SMMT) to call for government incentives to help
boost sales. ‘It
is imperative that the UK government increases the
pace in responding to industry proposals for a
scrappage scheme and access
to finance and credit’ CEO Paul Everitt said.
With increasing
industry pressure, BMI expects a scrappage scheme to be introduced soon and
this alone
prompts us to maintain a slightly more optimistic view than the
SMMT. Nevertheless, we forecast vehicle
sales to fall by nearly 17% y-o-y
in 2009 compared with a -20% growth forecast by SMMT. BMI holds a
bleak
economic outlook for other European economies, which will have a direct
bearing on our
expectations for export growth. A 52% y-o-y fall in vehicle
exports in January has prompted BMI to
revise its export forecasts to an
11% y-o-y fall to 1.11mn units in 2009. However, we maintain our earlier
output projections of a 12-15% y-o-y fall to 1.40mn units.
Carmakers based
in the UK, much like their global counterparts, have struggled to meet their
immediate
need for cash. German manufacturer BMW AG dropped a bombshell on
the industry when it laid off 850
workers at its Mini plant in Cowley,
Oxfordshire in February as part of its broader strategy to reduce
production, while Toyota Motor is reported to be considering reducing UK
production. General Motors
(GM), the parent company of UK’s
second-largest brand Vauxhall Motors, is considering the sale of its
UK
division as a part of its own restructure. It sold 298,912 units to occupy a
14.02% share in the UK,
falling behind Ford’s 15.1% control in the
market with sales reaching 322,514 units by end-2008.
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