Britain's car industry will shrug off recent setbacks to have one of its best years ever in 2001, according to a leading academic.

In an interview with the internet news organisation Ananova, Professor Garel Rhys, the director of the Centre for Automotive Industry Research at the Cardiff University Business School, said he believes that the UK car industry will recover strongly in 2001, despite Vauxhall's recent decision to axe 2,200 jobs at its Luton plant. That announcement stunned the British car making industry and led to predictions of a bleak future for the whole automotive sector.

However, Professor Rhys told Ananova that he believes that more than two million models will still stream off British production lines in 2001, making it almost a record year.

However, his optimism is not shared by Justin Urquhart-Stewart of Barclays Stockbrokers who told Ananova that Britain is producing too many dull cars that nobody wants.

"We have to see further rationalisation and an improvement in design and quality to attract customers or there'll be more blood on the hubcaps before the year's out," Mr Urquhart-Stewart was quoted as saying.

Professor Rhys disagreed, arguing that the job losses cannot destroy the basic strength of the motoring industry.

The problems were caused by "entrepreneural failure" - automakers producing cars that people don't want to buy: "You still get bankruptcies in a boom."

Professor Rhys told Ananova that the UK car market has huge potential thanks to low inflation and unemployment. He's confident that UK car sales will increase when "the penny drops" among consumers that there are currently some great deals about.

Most auto industry observers believe that a majority of UK car buyers are still waiting for prices of new and second-hand models to drop even further before heading to showrooms.

Vauxhall's late-2000 announcement that it will stop Vecra production at Luton later this year followed Ford's earlier decision to move Fiesta car production from Dagenham, east of London to Cologne in Germany, with the loss of 2,000 jobs.

There has also been speculation that Nissan will transfer production of the next generation Micra, which will share its platform with the next Clio, from the Japanese automaker's highly efficient Sunderland plant to a Renault plant in France, placing another 1,300 UK auto industry jobs at risk.

However Ananova says that the European Commission is expected to approve a £40 million government aid package this month which could keep the Micra in production at Sunderland.