Just when automakers thought it was safe to stick their heads above the economic parapet, then they get hit with yet another volley.
There’s been a cautious feeling abroad that the worst of what has been an unutterably grim couple of years for car manufacturers was starting to pass and that – excess capacity issues notwithstanding – small growth opportunities represented at least the end of the beginning, to paraphrase Churchill.
But there’s a new beast in the jungle that – certainly in Europe – is starting to make itself known more and more above and beyond the global recession and which has a direct impact on automakers.
Contagion is its name and it is the fear of its spread that has seen governments across Europe scrambling to head it off at the pass before recession leads to depression.
An easy template for what could happen is clearly events in Greece, which has avoided defaulting on its debt only by the most strenuous and drastic domestic measures, not to say concerted and expensive EU action.
And one of the tools at Europe’s disposal are the various rafts of sales taxes governments can deploy to raise desperately-needed revenue.
Only yesterday in the UK, Prime Minister David Cameron hinted that British plans to raise what it refers to as Value Added Tax from 17.5% to an eye-watering 20%, were unlikely to be reversed.
And carmakers are going to have to bear that increase just as they have introduced radical cost-cutting measures, imposed pay cuts if not redundancies and realised wide-sweeping structural reforms.
Speaker after speaker at this week’s Automotive News Europe Congress in Bilbao, Spain, most notably BMW sales chief Ian Robertson and Ford Europe’s chairman and CEO John Fleming, lined up to highlight the new tax hike, which will clearly have an impact on discretionary purchases such as new vehicles.
Other countries are reportedly examining hiking VAT rates and it appears that the European Union permits such rates to reach a staggering 25%.
We are not quite at that astonishing level yet, but we are equally not far off it. Just as the car industry emerges from the dark, it is impacted by yet another taxation hammer blow following swiftly on from the end of most scrappage schemes.
VAT rises are not direct taxation but they almost might as well be. Despite the mild protests so far, manufacturers realise they will perhaps have almost zero chance of reversing governments’ minds as they look to replenish bare coffers.
In such times as these, new car purchases could be viewed as non-essential luxury purchases, but try telling that to the workers who make them and who equally pay their share of sales taxes.
