Car production figures rise, pointing to modest upturn in British economy

• Source: Xinhua
• [09:21 December 21 2009]
• Comments

New car registrations through the scrappage scheme totaled 251,629 between May and November, and in November scrapped cars were 21.6 percent of all new car registrations, in line with rates recorded in previous months. Cars accounted for 98.5 percent of total vehicles through the scheme.

The scrappage scheme has helped lift overall new car registrations in each of the past five months. Over the May to November period total new car registrations increased by 5.7 percent. Once the vehicles in the scrappage scheme have been stripped out of the figures, the market was down 15.9 percent. The scheme accounted for 3.9 percent of light commercial vehicles (LCV)volumes in November.

The dramatic fall in new car registrations as a result of the financial crisis has also been seen in the LCV market. Total van registrations fell by 26.6 percent in 2008 with the total market for commercial vehicles falling by 22 percent. This has worsened into 2009.

Turning to the poor performance of commercial vehicle production figures, Everitt said: "Weak demand in key sectors of the economy and fragile business confidence continues to stall recovery in commercial vehicle output. Production volumes have fallen in every month since September 2008."

"While the November figures represent the smallest recorded fall in the past 14 months, the sector is still down almost 60 percent on the year to date," Everitt added.

What can be done to stimulate the market? It is likely to take a further hit from Jan. 1 when Value Added Tax returns to its normal 17.5-percent level. It was cut to 15 percent at the end of 2008 to help the economy at a critical moment.

The return to 17.5 percent will hit sales, and play a part in rising inflation.

The Bank of England said in its November inflation report: "CPI inflation fell to 1.1 percent in September, but is likely to rise sharply to above the 2 percent target in the near term."

In the longer term spare capacity and unemployment will both drag down inflation, making sales easier.

Everitt sounded a warning note for his sector, stating that 2010 was going to be a tough year, and continued favorable policies were needed from governments.

Total vehicle production is still well below previous levels and 2010 is set to be another tough year with considerable uncertainty at home and abroad. It is essential that governments continue to sustain and strengthen economic recovery, improving access to credit and encouraging investment in new technologies and products, he said.