It seems ‘uncertainty’ has become the buzzword and presiding state of affairs where the UK economy is concerned, and the country’s motor industry has not escaped its effects, with the future of the entire sector currently under a cloud of concern following a decline in sales and poor projections for the future.
Sales are down
Figures released recently by the Society of Motor Manufacturers and Traders (SMMT) painted a sorry picture of the industry. They showed that the number of new cars sold in the UK fell by 5.7% from 2016 to 2017, the sharpest decline since 2009. These numbers came with a warning that they expect a further fall of between 5% and 7% in 2018, which would mean a two-year slump of around 11%.
Forecasters have opined that, given the size and significance of the market, a vast portion of the economy and thousands of jobs are in serious jeopardy unless the government can alleviate the public’s reluctance to part with their cash, by clearing up ongoing concerns. They also explained the need for manufacturers to be able to properly plan for the future in terms of production level in relation to exporting deals with the European Union. But what exactly is it that people are worried about, enough to hold them back from purchasing a new car?
The decline of diesel
The number of diesel cars sold in the UK fell by 17% in 2017, and they are predicted to account for just 15% of sales by 2025, compared to the 50% they amounted to just a few short years ago. The SMMT put this down to a combination of recent scandals surrounding the diesel sector (particularly a high profile one involving Volkswagen), unclear governmental policy regarding the future of taxation on diesel cars (not to mention a possible ban on them altogether by 2040), and an increasingly poor reputation for the vehicles in regards to their environmental impact.
Mike Hawes, the Chief Executive of the SMMT pointed out the ironic impact of this, explaining that the more people are ‘sitting on their hands’, CO2 pollution will be worse, as consumers continue to run older, less efficient diesel models for longer.
No deal with the EU
Exports to the EU are currently a major source of income for UK-based car manufacturing companies. As yet, a deal for the future relationship post-Brexit has not been reached, and this leaves production in a state of limbo, with buyers hesitant to hand over money, and makers reluctant to risk overproduction. The SMMT have called for clarity on this issue as soon as possible, so that a transitional agreement and timescale can be drawn up.
Is certainty in sight?
The SMMT claim that the future of the UK’s car industry has reached a ‘critical’ stage, and that realistically, a deal needs to be in place with the EU by the end of April, before the first quarter of 2018 comes to an end. Adding weight to how serious they see this rapidly closing window of opportunity, they said that by this point, even ‘a verbal agreement would go a long way’ towards settling fears and minimising future declines in both production and profit – though of course, something more concrete would need to follow.