New car sales improve but target is missed

SALES of new cars in August failed to reach the 400,000 hoped for by manufacturers, increasing by just 1.67 per cent from a year earlier to 373,804.

Sir Hal Miller, chief executive of the Society of Motor Manufacturers and Traders, said yesterday that a revival in domestic sales before 1994 was unlikely and he believed sales this year would not exceed the 1.59 million in 1991.

He praised manufacturers for improving on the 'disastrous' base of August 1991, the lowest level for that month since 1984.

New car sales in the first eight months of the year fell by 2.47 per cent to 1.17 million from 1.2 million a year earlier. Manufacturers had hoped that the advent of the K registration letter in August would boost demand. But the SMMT said that without internal measures, including price cuts and heavy advertising, even the modest increase might not have materialised.

Earlier in the week Ford, whose Fiesta and Escort are the top sellers, also predicted that sales this year could be lower than in 1991. It said business was likely to be flat for at least six months.

Sales in the commercial vehicle market increased by 9.53 per cent in August to 31,704 from 28,946 last year. But for the eight months they dropped by 5.96 per cent to 142,098 from 151,107.

Sir Hal said that car dealers and manufacturers had seen margins cut sharply. 'There are certainly no longer any grounds for customers to hold back in the expectation of lower prices,' he added.

The industry had performed well in the light of the general economic gloom and had continued to invest in production and technology. But he warned: 'Ultimately this investment can only be recouped through higher sales or higher prices.'

The SMMT said that export markets, which have until now shored up production in the face of a slump in domestic sales, were beginning to decline as recession bit. Sir Hal added that, despite the deepening gloom in overseas markets, British manufacturers were the most competitive and should be able to increase exports.

Sales at home had also been hit by uncertainty among fleet buyers over the Chancellor's draft proposals to tax company cars according to price bands rather than engine size. The SMMT has opposed the banding system, maintaining that tax should be levied in direct proportion to car prices.

Professor Garel Rhys, head of the motor industry unit at the University of Wales and SMMT adviser, said the industry was paying a price for the Government's policy of maintaining the level of the pound in the European exchange rate mechanism.

He continued: 'The cure is well known. The Government needs to allow the economy to reflate and interest rates to lower. If it will not do so, we must grin and bear it and hope the policy works.'

Car manufacturers are hoping that the introduction of new models at the British International Motor Show in October will help to stimulate consumer demand. But industry executives have said that the Government must take action to kick-start the market.

Sir Hal made a renewed plea to the Chancellor to remove the special car tax of 5 per cent. He said the move earlier in the year to cut the tax from 10 per cent had helped sales and urged that it be totally abolished.

The SMMT believes that without the cut the short-time working recently announced by some manufacturers would have come sooner and been more severe.

Sir Hal rejected allegations that the industry sought special treatment. 'All we are asking for is the removal of special disincentives,' he said.

There should be better tax treatment for an industry that was investing heavily in environmentally friendly vehicle technology. He also called for clarification on ministers' targets for cuts in emissions from cars and when those limits might be introduced.

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