Blog: Dave LeggettUK car market as 'sponge'

Dave Leggett | 24 January 2014

I had an interesting chat with the head of the UK distribution arm for an international car brand this week. The conversation moved on to the question of the UK car market and the various factors that are underpinning it and making it much stronger than national car markets across the English Channel. We went through many of the factors usually cited (mentioned here), all playing their respective parts (relative strength of the UK economy being one - the latest figures this week showing a fall in unemployment, reinforcing that).

What's the most important thing though? What's the major factor behind it? He did not hesitate. "Look at what's going on on the continent," he said. "Volumes have fallen so far off the cliff, that sending cars to the UK has been the only way to keep plants running. Exchange rates have helped, too. The UK car market has acted like a sponge to absorb volume that simply cannot be sold in other countries. The UK car market also has the right structure for that; it's set up to be very competitive, new cars can be turned over very quickly into the used car market by dealers. It's like a tap with a variable flow, the flow to the sponge to be adjusted as pressures dictate. Dealer pre-registrations? Everyone has been doing it. Just look at the spikes in new car registrations that occur in the last few days of the month [SMMT sales reports available to the industry show daily sales]. It's obvious what manufacturers have been doing, and understandable given the bigger picture thay are faced with..."

ANALYSIS: A note on the UK car market

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