'Perfect storm' warning as October car registrations show best gain of 2009

Figures published yesterday (5 November) by the Society of Motor Manufacturers and Traders (SMMT) showed new car registrations up 31.6% to 168,942 units in October while year-to-date registrations now stand at 1,685,981, down 12.3%. Both private demand – up 86% in the month, further supporting positive impact of SIS – and business demand grew. "October has seen this year's biggest monthly increase in registrations with the successful scrappage scheme accounting for over 20% of them," said Paul Everitt, SMMT chief executive. "We have seen additional demand created by the extension of the scheme and customers wanting to avoid the VAT increase planned for January. Encouragingly, there has also been an increase in demand in the fleet and business sectors, which will be critical in sustaining recovery next year." Commenting on the latest figures, David Raistrick, UK manufacturing leader at Deloitte said: "This is wonderful news for the automotive sector and proves that the scrappage scheme has met expectations in terms of stimulating demand for new cars. "While the industry celebrates this good news, there is a 'perfect storm' on the horizon where the automotive sector will be affected by a combination of factors that could come into play in Q1 next year. "Within a short period of time we will see the scrappage scheme end and the VAT rate return to 17.5%. Meanwhile the government's proposed show room tax of £950 per vehicle could be implemented in March and interest rates may also increase in this period. Furthermore, car manufacturers may find themselves needing to implement price rises due to the low value of sterling increasing the cost of imported cars and parts. "At a time when the industry is showing promising signs of recovery, it is important the sector does not lose sight of the challenges ahead in 2010."