We do not normally get embroiled in the arguments
concerning the prices of passenger cars in the UK because we know that there are good
arguments on both sides, but recently we have listened to some absolute rubbish in the
efforts by vehicle manufacturers and their representatives in their attempts to fully
justify the situation.

As reports were released earlier this month showing that prices in
the UK were higher for 70 out of 73 models across the whole of Europe, we had to listen to
a senior executive from a VM trying to convince a room full of hard-nosed motoring
journalists that the current strength of the Pound Sterling was to blame. It seems that
the Pound being too strong makes cars more expensive to import. Strange that, the same
excuse is used when the Pound is weak.

The other ridiculous statement came from the SMMT who said
that car sales in January clearly indicated that there was no genuine concern by car
buyers about prices because although sales to private purchasers were down by 10.6%, sales
to fleets rose by more than enough to take the market into the growth phase. If anyone at
the Society of Motor Manufacturers and Traders honestly believes that fleet purchasers pay
the same price as the private individual, then they have no right to be there. Fleet
buyers can get enormous discounts, often as high as 33%. Please, make genuine
justifications by all means, but let’s have less out and out rubbish. The SMMT says
that the January figures were so encouraging that they expect 2.2 million cars to be sold
in the UK in 2000. We believe the figure will be nearer 1.9 million, and would be even
lower if the market was left to find its own level.

Those VMs who recognise that not everybody is stupid and
that prices have been unjustifiably high are now saying that there will be no price
reductions, but that compensation will be made by improving the standard specifications,
with such items as air conditioning units and ABS coming as standard. Fair enough, but
don’t accompany that with the statement that reducing the prices would ruin the
residual prices of the car parc. Pre-registering 500,000 cars and then selling them with
massive discounts and just a dozen miles on the clock has already done that.

Ford will have to hope that the decision to cut output
levels at Dagenham, and the obvious threat that all car assembly could cease there (as it
has at Halewood as far as Ford themselves are concerned) does not result in a backlash
against the company, because the UK is very important to Ford in Europe. The German market
is the biggest in Europe and is twice as big as the UK, yet Ford sells more cars in the
United Kingdom than it does in Germany. But the returns have been diminishing consistently
over the past decade. Over the past ten years, Ford has averaged 445,000 car sales a year
in the UK, whilst the market itself has averaged 1.9 million units over that same time
scale. In 1999, Ford sold 387,985 cars whilst the market was virtually 2.2 million.

A sign of the times for Ford was that not only did they
fail to make it one, two, three at the top of the best sellers table, but Mondeo actually
dropped to 6th place. Having said that, the Focus is proving to be a worthy
best seller for Ford, and justifiably so. Fiesta managed to cling on to the number two
slot, but with sales sliding away, and 2000 will be a tough year for Fiesta with the
all-new replacement not expected until 2001. Mondeo will also struggle with the common
knowledge that it will be replaced towards the end of the year, although there are hints
that the replacement could be brought forward by two or three months, which will certainly
help the cause.

When Ford looks over its shoulder in the UK, it is GM
Vauxhall that they see, but the company that is on the strongest roll right now is
Volkswagen with sales up by 20.4% to 154,610 from 128,421, thanks mostly to the new Golf
which has taken the number seven slot, having done no better than 17th in 1998.

With Rover failing miserably in 1999, the BMW Group saw
sales slip by 17.7% to 214,275 from 258,079 and that allowed the VW Group to move above
them in the table, despite Audi and SEAT both failing to match 1998 performances.