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Has Uk car manufacturing been in a false period of hope?


arbell9

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Take a look a this plot from the beeb website. It shows car production and export roughly at 2007 levels. Back then was still considered to be in the boom period. But look output fell from early 2004 to mid 2007, whilst the good times were flowing. Yes the current drop has been harsh, but one could conclude that the factories over produced in 07-08 to an unsustainable position. What we have now is a sharp correction.

Looks like its not all the credit crunch fault thats put them on skids row. The writing has been on the wall for a while, nothing really to do with lack of consumer confidence that we have now. Factories dont reduce output by 25% over 3 yrs unless there is falling demand for their product.

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I'm sure we've all seen reports for some time now about disused airfields full of cars waiting to be sold.

That has been the situation for some years now. Surely it's a very real indication that supply was massively outstripping demand even back then.

Add an economic downturn and the problem simply magnifies.

It's tempting of course to tell the car manufacturers that if they want to shift this stock they'll have to cut the sale price. Great advice if you're in the market for a new car. Not so good if you're trying to retain value in your current motor

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Alex, on average just how long do most UK residents keep their cars (when purchased from new)?

Being second is to be the first of the ones who lose.

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its boomimg in India , one of our guides said that there are aprox 2000 new cars on the road in Delhi every day!

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. But no price is too high to pay for the privilege of owning yourself.

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John,

I would say for the last 20 years us brits have been fixated with a 3yr cycle, ie when the car is first due its MOT. Longer warranties though have reduced that urge to change so quickly a bit, but not much. Also because the average car is worth about 2p on trade in at 3 yrs they think they are not worth keeping on the road and swap for new.

I know some people who will only ever drive cars they have owned from new, even though they accept used cazrs are good?

Alex

Edited by Alex --GT3--
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I have never bought a new car, and never will. As soon as the ink of your signature has dried, you lose more money than it costs me to get transport for a couple of years. I specialise in geriatric transport..."end of life" and "hospice care". The only car I ever spent more than

Scientists investigate that which already is; Engineers create that which has never been." - Albert Einstein

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I don't think the UK as a manufacturing location for cars is finished just yet. I can only comment with any authority on the manufacturer I work for, Nissan. The good period from start of 2007 was down to a brilliant new model designed in Cranfield, Beds, and built in Sunderland, so good it is still holding up now while other models have dropped off sharply (and its still a good seller in in Japan as well!). As long as the UK can still come deliver the productivity they manage in Sunderland (the most productive auto plant in Europe for god knows how many years on the trot) and still come up with designs that customers want to buy, then there will be a future.

There are alternative manufacturing locations of course. India and China figure in all the plans of the big manufacturers, but don't forget the logistics of getting a passenger car from those locations adds heavily to the price and offsets the cheap manufacturing costs. Supplier base and quality are also a challenge, in the short to mid term at least. There is a fair argument to say that localised production will become more and more of an asset as time goes on. The pound as taken a real hammering on FOREX over the last 6 months and this is great news for exporters in the UK (possibly the only good news). Its now far more attractive to manufacture a car in the UK than it was this time last year. We just need the customers!

The current recession is hitting all auto manufacturers, including those in India and China. The strongest will survive and be ready for the inevitable growth that follows recession. The UK can still be competitive with a determined work force who have learnt to get on with the job and be fantastically productive (only the French still prefer a good old fashioned strike). As long as we NEVER become as complacent as we where in the 70's and 80's then we will find a way to remain a viable place to build cars.

Malc

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John, as you say buying a brand new car is not the most efficient use of transportation funds, yet that's exactly what I've done most every time. The "anorak" in me wants to know each and every "event" in the life of the vehicle. Has it been maintained correctly? Has it been subject to overly zealous redlining? Has it been wrecked ever? Has it so much as been "kerbed" even?

The premium paid for the priviledge of being the first to drive it off the dealership's lot is excessive, to be sure. But it's not only for "peace of mind." Let's be honest. The biggest factor influencing most people's decision to purchase a new car is ego. The shiney new paint, the new car smell, the look on your neighbor's face when you first pull up into your driveway. And stellar 0 to 60 times don't hurt.

My first car was "used" because, as a student, I could not afford anything else. Still, I was quite happy with it. And I once paid all of $75 for a "beater" to park at the base when I would be gone on 9 day overseas trips in the Air Force--peace of mind factor at work again.

It speaks volumes for the Esprit that I was enticed into ownership of a [then] nine year old car, albeit with only 16,000 miles on it.

So, back to the UK auto industry (and all other countries as well it seems), will they be able to sell enough new vehicles to stay afloat? Once again, I've misplaced my crystal ball. And even if I find it, my guess is it would be cloudier than usual on this question. It all boils down to how many folks still gainfully employed are out there, and how many of them are driven emotionally with sufficient force to make what is often not the wisest of financial decisions. It's a "disposable income" question.

There will always be people out there that will buy new cars. Will there be enough of them to keep all of the current marques in business? Probably not. But the winnowing out process will hopefully make for more competitive drives, and a better, more efficient product--and one that we can still be happy with.

Being second is to be the first of the ones who lose.

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someone has to buy the new cars, if they didnt there wouldnt be any second had cars to buy...

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. But no price is too high to pay for the privilege of owning yourself.

Friedrich Nietzsche

find me on Tripadvisor

http://www.tripadvis...mbers/espritguy

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We are having a boom time right now, in my industry, rental. You see the problem is that people aren't buying new, Alex is quite correct in that. They are buying nearly new or Pre Reg. So where do these cars come from? Well 2 sources actually.

1. The rental industry. We buy new keep for 6 months and then sell back to the manufacturer or dealer at a rate agreed on purchase.

2. Dealer/manufacturer Pre Reg. This is where your cars parked in fields come from because UK VAT law won't let them sell the cars for 3 months after registration, so they have to be stored until sold.

The trouble is, Pre Reg'ing is becoming a thing of the past as it's expensive (the dealer or manufacturer takes the initial depreciation instead of us, the rental company) and it was normally done to hit targets, either for dealers or the manufacturer. Ford and Vauxhall tend to be the only companies doing this now and look at their business models and disasterous losses.

So, why don't they just sell them to us? Well we have a finite amount of vehicles we need and it can be expensive business for the Manufacturer, We expect big discounts due to economies of scale. However, even with these discounts we are still taking part of the depreciation so it's better business than pre reg. As such, the only nearly new up to 1 year old cars coming into the market at present are ours or dealer demo's.

I've always had new cars. Never had a used one since I was a teenager, not because I have too much money, but because I've always had a company car. People always say to me "I'd never buy new". Well for you I'd say one thing. Without new you will never have used. MAnufacturers are going away from Pre-reg so that leaves (even with us fleet buyers) a huge glut in the used car market. Already dealers are telling me that they are selling out of cars and can't get good used stock to replace them. This will only get worse.

What will then happen is what should have happened years ago (Again Alex is right we've had too many cars on the market making residuals terrible). Lack of decent used stock will increase residuals more and more until the price of a used car is closer to that of a new. People will then start buying new again and round and round we go.

One more point in regards to Alex's graph. Thats UK Car Production, not worldwide. It doesn't show imports of cars which looks opposite to that graph. The numebr of cars sold in the UK went up year by year until last year.

What happened to that graph then? Well partly MGRover and Peugeot. Both shut down UK manufacting in 06-07 removing nearly 200,000 cars from UK manufactured car figures. Honda set up China Manufacturing and Ford reduced Dagenham manufacting over the time that graph shows from 500,000 units to virtually zero.

You have to know the whole story to make a judgement. Hopefully that helps.

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And then there is that "alternative universe" known as Havana, where used cars are recycled endlessly.*

Let us hope that remains an isolated time capsule--an historical "living museum"--and not a prelude of what's to come.

...doom 'n gloom...doom 'n gloom...mutter, mutter, mutter...run!...the sky is falling!.."Mad Max" was right! :)

*keeping in mind that there are some cars (hint, model names all begin with an "E") that deserve such treatment :(

Edited by Iconic Ride

Being second is to be the first of the ones who lose.

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