Exports push car output to a 21-year record

RUSSELL HOTTEN

UK car production reached a 21-year high in 1995 due to a sharp rise in exports. Fourth- quarter figures published yesterday by the Central Statistical Office show that the annual total reached 1.532 million vehicles, 4.5 per cent up on 1994.

Cars for export jumped 20.3 per cent to 744,608, although production for the home market slumped more than 7 per cent.

Ernie Thompson, chief executive of the Society of Motor Manufacturers and Traders, said the export figures were particularly encouraging. "But the outlook for 1996 will much depend on a stimulus to domestic market output."

The figures dispelled some of the gloom that followed release of the 1995 sales numbers showing that the UK market grew by just 1.8 per cent to 1.945 million cars.

News that production is high may help to explain why the Government was so reluctant to assist the car industry by introducing "scrappage tax" in the Budget to help boost sales.

In 1974 the number of cars produced in the UK was 1.534 million, with a record 1.747 million produced in 1972. From that high point, production figures spiralled down, reaching a low point of 908,906 in 1984 before beginning a slow climb back.

The influx of Japanese manufacturers - Nissan, Honda and Toyota - led the way back, and increased productivity and quality made UK-built cars better value.

The growth in cars produced for export was helped by the fall in sterling in the first half of the year, and by efforts made by car manufacturers to escape the sluggish UK market.

But analysts warned that manufacturers risked cutting off further export growth by raising prices. According to CSO figures, car price inflation was 4.3 per cent in December, compared with the RPI rise of 3 per cent.

Ian Shepherdson, economist at HSBC Greenwell, said manufacturers had consistently forced up prices for the past two to three years. He said recent pay rises, such as the Ford and Vauxhall deals, would mean further car price rises.

He said: "Several European markets remain depressed, with France and Germany possibly getting worse. Manufacturers will be selling into a shrinking market, and they will not have help from the exchange rates."

Yesterday's CSO figures showed that commercial vehicle output for 1995 totalled 233,001 - a rise of 2.28 per cent on 1994.

Unlike car production, it was the home market that was the star of the commercial side - rising 6.32 per cent while export production fell 3.32 per cent.