August car sales fail to take off

A slow month dashes hopes despite discounting, writes David Bowen

GLOOM has spread through the car market as the all-important August sales have turned out below most companies' expectations. With less than a week of the month left, sales are just 0.5 per cent higher than for the same period last year.

This means total August sales are unlikely to be much above 455,000, compared with the 475,000 forecast by Vauxhall and Ford.

"It's not really a gang-buster August," a Vauxhall spokesman said. "Sales will be flatter than we had expected." A spokesman for Rover said the month "is no great shakes", adding that his company had not been planning on a higher sales volume.

Market leaders Vauxhall and Ford have been involved in heavy discounting to keep volumes up. The most successful scheme seems to have been Vauxhall's 50-50 offer, under which customers pay for half the car now and half in two years' time. The company says it has been running short of some of the cars covered.

Rover's policy of moving up-market, to escape a head-on fight with Vauxhall and Ford, seems to be running into resistance from consumers. Its market share is around 10 per cent, the lowest ever, although chief executive John Towers says he is no longer interested in market share, only profit.

Nevertheless, the 400 hatchback, the replacement for the 200 that was launched in May, sold slowly in its first two months, only picking up momentum in the last few weeks. It has been criticised in the fleet market press for its comparatively high price, which pitched it nearer to the Mondeo than the Escort, to which it is closer in size. The Rover spokesman said recent price increases by Ford and Vauxhall have narrowed the price gap.

Land Rover dealers have found they have had to offer big discounts on the Discovery model, even though sales remain strong. One dealer said the company had launched a new model while too many of the old version were still in stock. The early launch seems to have been prompted by Norwich Union's refusal to insure the older model because its security system was not good enough. The Discovery, which can easily be broken up for valuable spare parts, is near the top of the motor thieves' hit-list.

The industry is concerned that the UK remains flat at a time when continental markets are also weakening. The end of the Italian and French "scrapping levies" in June have caused those markets to dip suddenly. Car companies are now concerned that the scheme, under which the two governments paid people to scrap old cars, did not do any more than bring sales forward. It now seems likely that many manufacturers will have to go on to short- time working over the winter, as they have for the past few years.

Once again, though, British industry will be less affected than its continental counterparts. Although Ford and Vauxhall may have to make cuts, overall production will continue to rise, protecting the components industry. Honda and Toyota are continuing to build up their UK production at the expense of imports from Japan, and next year Ford at Dagenham will start producing Mazda-badged Fiestas for export.