Page last updated at 10:07 GMT, Monday, 23 March 2009

The plight of the UK's motor industry

Graph of falling new car registrations in the UK

By Ollie Williams
BBC News

The cancellation of the 2010 British International motor show and a record drop in UK car production are the latest signs of trouble for a sector that has endured a bleak existence for months.

In the UK, as well as in other countries, sales have plunged, jobs have been cut and production has been scaled back sharply.

The BBC has reported on more than 100,000 worldwide job losses directly linked to the industry's demise, with carmakers poised to cut even more jobs in the months ahead.

Both the production and sale of new cars have hit worrying lows in recent months.

Graph showing new car sales in Europe
A total of 59,777 new cars were produced in the UK in February 2009, a record 59% drop when compared with the same month in 2008.

The number of new cars registered in the UK has also declined, down 30.9% year-on-year in January and 21.9% in February. Overall, sales have fallen 28% so far this year.

"New car registrations continue to decline and urgent action is still needed," said Paul Everitt, chief executive of the motor industry body SMMT, in March.

SMMT predicts that the UK car market will shrink by a fifth this year to 1.72 million units.

Dismal September

In the UK, sales figures for the 10 most popular car marques show that the latter half of 2008 was disastrous for the industry.

Graphs showing sales of luxury cars versus Ford and Vauxhall

September is normally a bumper month for carmakers, as UK drivers take advantage of new registration plates.

But whereas the top 10 carmakers, led by Ford, Vauxhall and VW, shifted 282,795 cars between them in September 2007, they managed just 220,844 in September 2008, a drop of more than a fifth.

The industry has since shown little sign of recovering.

Ford, which has averaged January sales of 28,613 over the past six years, sold only 20,951 cars in the first month of 2009.

Less popular marques are even harder hit. Renault sold 3,099 cars in January, down from 7,609 a year earlier, while Mitsubishi sold just 343, down from 1,263.

Very few major manufacturers buck the trend, though Jaguar recorded January sales of 1,173, up from 757 in January 2008.

Graph of falling UK car production figures

A lack of sales has forced many carmakers to reduce - or halt - production of new vehicles in the UK.

In the last quarter of 2008, UK plants produced 265,485 cars, down from 401,080 for the same period in 2007.

January's 58.7% year-on-year drop in production suggests that figure will fall further in 2009, with lengthy production stoppages at Honda and Bentley yet to have an impact on the statistics.

Price hike

However, cash-strapped consumers eager for bargains will struggle to take advantage of the car industry's woes.

While carmakers are finding it difficult to shift their vehicles from the forecourt, the signs are they are not prepared to sacrifice their profits by dropping prices.

Ford and Vauxhall both raised their UK prices in February - the Ford range increasing in cost by an average of 4.7%, while Vauxhall increased the prices of all models except the Vectra and VXR8 by an average of just under 5%.

The luxury market is similarly affected. Bentley has announced a 5% increase in price for all of its models will apply in the UK from April 2009.

Graph of Consumer Price Index for new and used cars

That reflects a wider trend identified in the government's consumer price index (CPI), which uses a number of factors to determine whether the cost of basic consumer goods is increasing or decreasing.

The CPI figures for November 2008 show that while the price of a used car had decreased noticeably, new cars were slightly more expensive year-on-year.

A CPI figure of 100 means consumers can expect to pay 2005 prices. In November, new cars carried a CPI figure of 104.7, while used cars had dropped to 84.2.

Roughly translated, that means if you live in the UK, you can expect to pay up to 12.5% less for a used car than you would have done in November 2007 - but a new car would cost you on average 1.8% more.

Global plight

The UK industry is not alone in feeling the pinch, however.

In the US, car sales may drop to a 27-year low of 10.5 million units, automotive giant General Motors (GM)predicts.

GM has been one of the worst hit manufacturers. It has axed 47,000 jobs, ditched 12 car models and cut production at five plants.

And even after receiving billions of dollars of assistance from the US government during recent months the future of both its US operations and that of its European subsidiaries Opel, Vauxhall and Saab is up in the air unless governments step in to help..

Rival US automotive group Chrysler is in a similarly precarious situation.

In Japan, Toyota said worldwide production of all its brands fell 39.1% in January. Honda reported a 33.5% drop, the biggest since 1999, while Nissan's global output declined 54%.

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