Tough times for car industry, but good news for buyers

The last three months of 2010 could be one of the toughest periods for the UK car industry in months.

An Autoblog survey of some of the country's leading car manufacturer bosses has revealed a worrying number think the last quarter will be 'very tough'.
We asked captains of the automotive industry to rate how hard they think the last period of the year will be on a scale of 1 (easy) to 10 (hard).

Most telling was the response from the UK's biggest selling car brand. Ford of Britain's managing director Nigel Sharp said that on our scale the market would be a challenging '10' - the most pessimistic of all surveyed.

'The market is likely to remain intensely competitive, probably rated as a 10 on your scale,' he told us. 'The January VAT increase is likely to result in some increase in the market in the last quarter though.'

His thoughts on the VAT rise - which goes up from 17.5 per cent to 20 per cent - encouraging some buyers to shell out this year were echoed by the majority of car chiefs we spoke to.

'I also believe that we might see some pull-forward from January because of the VAT rise,' said Michael Cole, managing director of Kia Motors (UK).

Rating the market as a seven on our scale, he added: 'I would say the final quarter's prospects are still 50/50 but we feel that there is business out there.'

Fellow Korean brand Hyundai saw great success under the scappage scheme last year which was introduced the last time things got tough. MD Tony Whitehorn rated the rest of 2010 as an '8' and said he believed sales would be 'extremely challenging'.

He added: 'Consumer confidence, the main driver of demand for cars, has taken a dip in the last two months and is expected to remain on a downward trend.'

Erring on the side of caution were Citroen UK boss Linda Jackson and Toyota chief Jon Williams – both rated the market as 'tough', but were confident their brands would perform.

Jackson - billing the market a '3' - said: 'We feel confident that Citroen has just the right product for this current competitive market.'

While Williams added: 'The final quarter will be extremely challenging for manufacturers, but we feel we have the right products for the current market.' He rated the market 7/10 in terms of difficulty.

But there are some manufacturers out there that are still bullish. Seat has come out with a competitive Pay No VAT deal (Seat slashes prices) to boost demand and boss Peter Wyhinny thinks that will do the business, rating the market as a 6.5/10.

'Q4 will be a more challenging period, no doubt,' he said. 'However we are out of the blocks very quickly with an attractive, simple, and clear 'pay no VAT' offer.'

But even he wasn't as confident as Mazda MD Jeremy Thomson. Branding the market an easy 3/10, he said: 'With weak consumer confidence and the government's fiscal counter-measures not yet fully crystallised it is tempting to see the quarter as particularly challenging, but I would rate it as 3/10 for Mazda.

'Through 2010 we have achieved a number of record months in retail shares and while small car sales are extremely price sensitive, we see strength in our mid and large carlines in both retail and fleet.'

So final word from the SMMT's chief executive Paul Everitt. He represents all brands in the UK and lobbies the government on behalf of the industry.

'The economic outlook for the rest of 2010 remains tough,' he said, rating it a seven on our scale. 'It is important that alongside government's austerity measures, there is a strong programme to boost consumer and business confidence. The last quarter of 2010 will be difficult, but the full year is still expected to marginally outperform 2009.'

So what does this mean to you? Well, if you're in the market for a new car this is all good news. Worried car manufacturers mean marketing initiatives will be flowing. Hold tight for a few weeks and soon they'll be some very good offers to tempt you into dealers.

Are we heading for a double dip recession? Or is this simply car makers worried about their profits? Let us know what you think by posting your comments below.
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