Sales soar, but the car industry isn’t in the fast lane yet

For dealerships across the country, and across Yorkshire, business isn’t exactly booming, but it’s no longer flat. There’s a marked difference between now and the dark days of the recession’s first dip.

But as so many economic indicators suggest the wider recovery is crawling along,  why does the car industry seem to be moving out of the slow lane?

“The car market has remained pretty strong largely because of the availability of low rate finance,” says John Graeme, boss of Redline Racing of Knaresborough which sells luxury cars. “Essentially that’s what has kept it fairly buoyant.

“These days I’d say about 45 per cent of the cars we sell are bought on finance, whereas just a few years ago, it was more like 30 per cent of cars.

“It’s a shame the housing market couldn’t do the same, in fact I find it bizarre that it hasn’t followed the same pattern.

“I think we have seen renewed confidence in this sector, what makes cars stand out is the fact that they are affordable because of the availability of finance and the willingness of those selling cars to do deals.

“But another key factor is the fact that manufacturers have really upped their game over  the past five years. At the start of the recession a lot of sectors donned tin hats and headed for the trenches, but the motor industry seemed to do the opposite.

“So you’ve had big names like Audi and BMW diversifying their ranges and including new features. Rather than being reactive they were proactive – and that’s across the entire range, from small cars to luxury cars.”

The affordability of new cars has also boosted the used car market, with newer, more high spec motors trickling down the food chain. Used car sales have risen by a third.

In some cases it is almost as cheap to buy a new car as it is to buy a 12-month-old car, meaning the second hand market is being constantly fed with high quality vehicles as drivers upgrade more frequently. But the long-term improvement in car sales  depends on how much longer drivers will upgrade for. If consumers are forced to tighten their belts further, that could change.

Even Mike Baunton, interim chief executive of the SMMT, highlighted the qualified  success of the UK motor  industry.

“Consumer confidence, regular purchase cycles, attractive finance deals and wider market factors continue to make new car buying favourable for motorists,” he said, and added: “The UK continues to perform well ahead of the troubled euro zone.”

But while economic strife continues to dog our continental rivals now, what happens when they recover from the recent recession?

There are other factors which suggest the upturn may only be short to medium term. The dash for more ecological and efficient cars has seen more drivers ditch their old motors recently in favour of green alternatives which don’t guzzle the gas.

But once they’ve made the change, and if fuel prices drop again, the big fear is that the  spike in sales may drop to a plateau.

Craig Hamer is managing director of the Halifax-based Dews motor group.

“One of the first questions people ask us when they come to see us is: ‘How much will I pay in road tax?’ Because they equate lower road tax with lower fuel usage and costs.

“That has become a big concern for a lot of customers.  Now when you look at dealers’ websites you can search through the cars by fuel efficiency as  well as other measures, such as price and colour, which is quite telling.”

Mr Hamer also agrees with the feeling that inexpensive finance has helped fuel the motor industry’s recovery, but he remains cautiously optimistic about the recent batch of positive figures.

“These signs are good and we’re definitely heading in the right direction,” he says. “Plus, this 15 per cent rise does reflect the general upward trend we’ve experienced recently.

“But in my experience we  often get off to a good start at  the beginning of the year and quite often things tail off towards the summer. Although we’re doing quite well at the moment only time will tell whether this  can be sustained.”

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