Ford Europe said raising sales levies would discourage new vehicle sales as it appears increasingly likely governments are to impose further indirect tax hikes.

Swingeing cuts to European Union (EU) budgets have seen a swath of austerity measures cause widespread unrest across the continent but Ford cited government action to tackle budget deficits through further taxation as a measure that could hurt demand.

Addressing delegates at this year’s Automotive News Europe Congress in Bilbao, Ford Europe chairman and CEO John Fleming said increasing sales taxes would discourage new car purchases.

Only yesterday (22 June), the UK government signalled its intention to raise VAT or sales tax from 17.5% to 20% and it is highly likely others may follow suit.

“Economic indicators would suggest we are starting to see a recovery, but we have got all the sovereign debt issues and austerity measures,” he said.

“Ever-increasing levels of VAT (sales tax) will not get people to come out and buy more cars.”

However, Fleming praised several European automotive initiatives and reserved particular approval for the European Investment Bank (EIB) which had alleviated deep-seated problems at many manufacturers and suppliers.

“We had the industry rapidly disappearing,” he said. “[EIB loans] did not distort the market – let’s be honest, a lot of suppliers relied on the health of key players. Most of us took that opportunity.”

But although Fleming cited the EU as a key element in recovery – particularly if the body made it easier to move goods and services across national borders – he insisted automakers must also seize the chance to show initiative themselves.

“If we are to prosper in Europe, we have to play to our strengths,” he said. “We must attain leadership in environmental and sustainable technologies.”

Fleming added Ford had decided to move away from regional teams to address working issues globally. “It seems so simple [but] it took us so long to get here,” he said.