Blog: Dave LeggettUK car market still up - some thoughts

Dave Leggett | 6 November 2014

The UK car market continues to surprise and was up by 14.2% year-on-year in October. It looks good. There are a few things to note. For one thing, people in the industry say it is very, very competitive. So, unit sales may be up, but making money is another matter. That said, the euro/sterling exchange rate has moved in the right direction over the past year, with the euro depreciating versus sterling by around 8%. If margins are tight on vehicles shipped from the continent to the UK, that kind of swing can really help.

There's also the matter of the sluggish eurozone economy and market. While demand on the continent remains weak, manufacturing more for the UK car market is one way to deal with the problem of keeping plants running. The capacity adjustment since 2008 is way smaller than the decline to the market - overcapacity is out there and there is pressure to keep plants busy, somehow. The UK market is seen as a good outlet.

The French car market was down 4% in October. Confidence remains fragile across the region. Unemployment remains worryingly high in a number of countries with little prospect of reduction in the forseeable future. If there's growth in southern Europe, it's coming off a very low base. The latest news suggests that Europe will be staying economically sluggish for a while longer and has got worse over the past six months. The European Commision's latest economic forecasts have just been revised down with eurozone area economic growth next year forecast at just 0.8% (previously forecast in the spring at 1.7%).

This from the EC's latest report on the state of the EU's economy: "After just a year of moderate growth, the momentum of the EU economy began to slow in spring 2014. In the second half of this year, GDP growth in the EU is set to be very modest, while in the euro area it will almost stagnate."

So, what does that say for the UK car market outlook? Well, maybe PCPs and the retail push is nearing its limits. However, another year of depressed sales in mainland Europe does point to the current push of volume into the UK being maintained. The market is running at circa 2.5m a year, above what was considered 'normal' pre-crisis. It's hard to see growth on that high level. But the market could well tick over not far off that level in 2015. Good volume at a time when volume remains very low in neighbouring countries. But it's still going to be highly competitive and much depends on how that exchange rate moves in terms of short-term financial gains for the OEMs.

UK: Car market up 14.2% in October

Sectors: Vehicle markets

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