Motor Show 1993: Sales up overall but slower in South-east: As the London Motor Show opens at Earl's Court, Chris Wright looks at the state of the car market

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The Independent Online
BENEATH the encouraging increase in new car registrations is an underlying unease at how London and the South-east has been slow to respond to the upturn.

While new car registrations rose 8.5 per cent across the country for the first seven months of 1993, the rise in the London area, which accounts for around 37 per cent of all sales, was just 1.5 per cent.

The slow pace of the upturn in the capital is a reaction to three and a half years of a recession which hit the affluent South-east hard for the first time. The area inside the M25 ring is the centre of vehicle purchasing gravity, rich with business headquarters, hire fleets and private buyers - and it experienced a downturn never before suffered.

The problem was highlighted by a run of five years of unprecedented high sales between 1955 and 1959, fuelled by economic boom, soaring property prices and encouragement to spend. Businesses and consumers did not sit on their assets; they used them to buy things, including cars.

When the slump came, businesses held back on renewing their fleets and the showrooms emptied of private buyers. Vehicle sales bombed and having suffered the effects of serious recession for the first time, the return to normal business is slow.

Dealers and manufacturers are waiting for the floodgates to open. There is a sizeable pent-up demand: companies have held on to their fleets longer and the need to replace them is now pressing. This reservoir of latent demand is increasing and it is a matter of triggering it off.

Neil Marshall, of the Retail Motor Industry Federation, says: 'If the economy stays on course we will certainly see a large pick-up in 1994, but the industry is still very much aware that there are some worrying increases in taxation on the horizon. The fear is that the expected resurgence could be kicked into reverse.'

This view was echoed by a number of manufacturers concerned at the effect of increases in any form of taxation which might be announced by the Chancellor next month.

Phil Horton, communications director at Renault UK, which has its headquarters in west London, says: 'There was a burst of sales activity during August, but September proved tough in the area. People are now concerned about what the autumn budget will bring and the confidence to start buying again is not there. House prices hold the key as much as anything else. Once they start to move significantly upwards again we might see a resurgence in car sales.'

Property price is another factor which has not helped dealers in the South-east; many expanded during the boom years and were saddled with high interest loans and falling real estate prices.

A number of manufacturers are offering London dealers special advertising and marketing support to help boost sales. Ford and Renault are among those who provide their London outlets with additional help. This is used to boost media and television advertisement spend.

Mr Horton added: 'We made a decision at the beginning of the year to make our London dealers a special case and increase the support we give them.'

Rover, one of the success stories of 1993, both in the UK and Europe, said that while the South-east had been much slower to pick up than further north, its new models, notably the new Rover 600, had been able to sustain dealers.

Angela Wigley, Rover spokeswoman, said: 'We have recognised the problems of our dealerships, particularly around London where in many cases there is pressure on space because of the shortage and cost of real estate.

'We have put a number of systems into place to help them. Rover's direct distribution scheme, where we hold vehicles at various centres around the country awaiting order, means that dealerships do not have to hold - or pay for - such large stocks.

'Our approved used car scheme has also been computerised so dealers can find a particular vehicle for a customer even if they do not have one in their own used stock.'

Like Rover, Vauxhall, Ford and many other producers and importers have either introduced or are looking at direct distribution in order to keep down the stocking costs and reduce the overheads of their dealerships.

Most have also introduced lease purchase schemes which have done much to stimulate the private sector. Customers can drive out of the showroom with a new car at much reduced monthly payments and at the end of their lease period can opt to hand the car back, or be given a guaranteed residual value against another new vehicle, or pay a lump sum and keep the car.

Getting back the corporate sales has proved more difficult, with small and medium sized businesses still lacking the confidence to invest. The industry does not believe that these will be lost for long, even with company vehicle drivers being offered a choice of car or cash - the feeling is that an awful lot of cash would need to be involved to compensate for a brand new car and hassle-free motoring.

There is evidence that those who are buying (both company and private vehicles) are buying smaller. The executive car sector is down 7 per cent while the increase in car sales generally has been largely in small and medium-size vehicles.

Graham Horder, of the BMW dealer Cheyne, based in Chelsea, a London area least affected by recession over the past three years, said that the corporate fleet sector had held firm but there had been a downturn in private buyers.

He said: 'This has been picking up this year; private buyers and the small businesses are starting to purchase once more. Our problem now is with supply. A shortage of cars means that we are having to quote delivery times of up to three months, but all the signs are encouraging.'