Page last updated at 14:29 GMT, Tuesday, 3 February 2009

Ford and Vauxhall raise UK prices

New Vauxhall cars
Ford and Vauxhall have both been hit by the weakness of the pound

Ford and Vauxhall have both said their UK car prices are going up, despite falling sales and news of government measures to support the sector.

They both blame the weakness of the pound - much of their manufacturing is carried out in the eurozone, so sales in pounds are worth less to them.

Ford is putting up the prices across its range by an average of 4.7%.

Vauxhall is increasing the prices of all models except the Vectra and VXR8 by an average of just under 5%.

"We have to increase our prices," said Vauxhall spokesman Simon Hucknall.

"It is essential - it is not desirable, but it is essential."

Ford said the weakness of the pound had put it under "severe economic pressures".

Loan package

Car sales in the UK fell 21.2% in December, compared with the same month the previous year.

Last month, the UK government announced measures designed to support to support the car industry.

Ford assembly line in Germany
Ka 7,945 up 138
Fiesta 9,195 up 724
Fusion 11,995 up 487
Focus 13,435 up 867
Focus Coupe-Cabriolet 18,795 up 1,223
C-MAX 14,595 up 859
Kuga 18,995 up 552
Mondeo 16,595 up 1,059
S-MAX 19,195 up 1,057
Galaxy 21,295 up 1,200
Source: Ford UK

This included guarantees to unlock loans of up to 1.3bn from the European Investment Bank, as well as a further 1bn in UK government loans to fund investment in greener vehicles.

Vauxhall's owner, General Motors, is also benefiting from the US Congress's $14bn (9.8bn) bail-out of the car industry.

Buyers' market

The list prices given by car manufacturers comprise the wholesale prices they charge to the dealers plus an assumed margin for the dealer.

The dealers themselves may charge more or less than the list price and there have been signs of showrooms having to cut their prices and margins significantly to try to clear their stock.

"With fields and car parks right across the country piled high with unsold cars, it may come as something of a surprise to hear that both Ford and GM are planning to raise the price of all cars they sell in the UK," said Howard Wheeldon of BGC Partners.

"Of course, announcing a price rise is one thing but putting it into effect quite another. From a customer perspective, there has probably never been a better time to buy a car."

Dealers are still struggling with the problem that many of their potential customers are having trouble taking out car loans as a result of the credit crunch.

More increases?

The decline in the value of the pound against the euro has been dramatic, falling from 1.34 euros to the pound at the start of 2008 to a low of 1.05 at the end of the year.

It is a particular problem for carmakers because even those that assemble their cars in the UK use parts manufactured in the eurozone, for which they have paid in euros.

Ford said in a statement that more price rises were likely unless the pound strengthened against the euro.

It has not increased prices anywhere else in Europe, except Russia, where the weakening rouble has presented the same problem.

Ford's prices in Russia have gone up by 4.5% on average.

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