Scott Reid: Bump in the road for car makers

The Jaguar XE 2.0 Diesel. Picture: PA
The Jaguar XE 2.0 Diesel. Picture: PA
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ON THE face of it, the latest stats on car production showing that output had reversed by just under 4 per cent in April compared with a year earlier have all the makings of a blip.

Britain’s car-makers have been in the driving seat when it comes to the nation’s manufacturing revival. The industry has gone from pre-1970s boom to virtual bust to boom again, though these days the big names are either foreign players such as Honda and Toyota or venerable domestic marques now in overseas hands – think Bentley and Mini.

April’s production figures show the number of cars built for British buyers jumped by 11.1 per cent as the market for new vehicles here heads back to pre-recession levels. There are several reasons for this, not least an economic feel-good (or rather feel-less-bad) factor lacking in many of our Eurozone neighbours.

Sales have also been fuelled by the availability of low-cost finance packages, many of which involve an end-of-period balloon payment that sees buyers return to the same dealer a couple of years down the line to trade up to a new set of wheels. You can argue the merits of such schemes in a society still laden with debt, but there is no doubting their popularity and the stability they have brought to the nearly-new trade-in market.

But here’s the rub. These days overseas markets account for four in five cars built in Britain and it’s a marked slide of almost 8 per cent in the number of motors destined for buyers abroad that lies behind last month’s downturn in output.

Cooling demand in China has taken its toll on the luxury end of the market in particular, while the imposition of sanctions over the Ukraine crisis has impacted Russian car dealerships.

Still, despite some key overseas markets stalling, UK car production managed to top the half-million mark in the first four months of the year. Industry bosses remain bullish, highlighting the roll-out of important new models, including Jaguar’s swanky new XE.

Mike Hawes, the Society of Motor Manufacturers and Traders’ chief executive, is confident that output will hit record levels in the next few years, “providing global markets perform well”. Britain, which built 1.53 million cars in 2014, is expected to churn out almost two million in 2017 – an all-time record.

Those weaker April numbers will be of concern to an industry that supports tens of thousands of workers and a Treasury that pockets billions in revenues. Hawes is right to sound a note of caution, and some companies may need to cut their cloth if exports continue to drag. But there appears little need to dig out the jump leads just yet. «