Frankfurt Motor Show: Car market may not grow for five years

The new car market could remain flat for a worrying three to five years according to the chief executive of the body that represents the auto industry.

Society of Motor Manufacturers and Traders chief executive Paul Everitt explained that until buyers become more confident, dealers and car makers are in for a rough ride.
And in an exclusive interview with Autoblog at the Frankfurt Motor Show he said the chance of the scrappage scheme ever being revived is highly unlikely.

"We simply haven't made the progress this year that we thought we would," he said. "At the beginning of the year we were all thinking it would be a tough first half then we'd see growth, but we just haven't seen that at all.

"We need consumers to feel more confident. I feel like Arsene Wenger when I say it, but it's easy too lose however it takes a long time to get confidence back!"

Everitt said a squeeze on incomes, little or no rises in salaries and stagnant house prices were all causing problems with consumer confidence.

"The things that previously buoyed the economy, such as houses gaining in value, are not happening," he added. "Before, people would release equity from their homes and buy what they wanted and others felt more comfortable taking on debt when they had an asset that was increasing.

"The new car market is likely to remain relatively flat – between 1.9m and 2.1m – for the next three to five years.

"It is always difficult making this kind of prophecy but in 2012/13/14 I can't see a lot that will make a big difference. It will take that period of time for car buyers to come to terms with a new kind of reality."

The last time the auto industry faced such tough times the Labour government introduced the scrappage scheme which saw buyers encouraged to trade in 10-year-old cars in exchange for cash off new models. Everitt says we're unlikely to ever see a scheme like it again.

"Scrappage was a great thing and did a great job," he said. "But I think we would struggle to convince a government that is running an austerity programme for another.

"They are telling everyone that the profligacy of the pervious decade is the reason for the current austerity and that people need to balance their budget. I don't think they would see a £300-400m expenditure as the sort of thing they want to do. And that's even with the last one essentially self-funded by VAT."

Everitt does believe there are still some reasons for the UK car industry to smile though. After a look around the huge halls of the Frankfurt show he said UK manufacturing was in rude health.

"Frankfurt is always spectacular – everyone wants to put on a big show," he said.

"There's a lot of new and interesting product here. From a UK perspective I'm interested in the things that directly impact on us like the new Honda Civic, Jaguar Land Rover with the CX-16 and the new Defender concept. All look interesting.

"They are important as they are built in the UK. We have a lot of interest here. Mini, Bentley, Rolls Royce, Aston Martin, Jaguar Land Rover, Morgan, all are built in the UK. The manufacturing side is strong as we can see demand in China and Russia. That's good news for UK factories."

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