Things look up for auto sector

In January, new car registrations rose by 29.8% to 145,479 units, their seventh successive monthly increase. The scrappage scheme continued to boost the market, accounting for 17.8% of sales, despite return to 17.5% VAT on 1 January. However, the Society of Motor Manufacturers and Traders (SMMT) which compiles the figures, said the outlook was constrained, with demand expected to fall 9% to 1.82 million units in the full year. SMMT chief executive Paul Everitt said the January increase provided a better than expected start to 2010 for the UK motor industry. "Scrappage continues to lift demand successfully and today's announcement of a continuation of the scheme to the end of March will allow the maximum number of people to benefit from the budget that's still available," he said. "Industry expects another difficult year with the availability of finance, consumer confidence and sustaining demand post-scrappage, key to performance in the second half of the year, but signs of recovery in the fleet and business sectors are encouraging." An extra month was been added to the deadline for the government scrappage scheme today, allowing manufacturers and dealers more time to prepare for and operate the exit phase of the Scheme. This change was announced by government following requests from car manufacturers for more time to prepare dealers and inform consumers. Previously due to complete in February, the scheme will now run until the end of March or until the money runs out, whichever is the sooner. Business Secretary Lord Mandelson said: "Against the background of the economic downturn the scrappage scheme has proved a great success, driving UK car sales, protecting jobs and supporting the supply chain for car manufacture at a time when this sector needed it most. "If you're considering buying a new car, you should place your order as soon as possible to avoid disappointment, because the budget is strictly limited." In the final stages of the Scrappage Scheme manufacturers will be apportioned order quotas to aid an orderly close down. David Raistrick, UK manufacturing leader at Deloitte said the new car registration figures were positive news for the automotive sector as they climbed back to the numbers enjoyed two and three years ago. "The extension of the scrappage scheme is superb news for the industry giving buyers the chance to use up all the available funding," he went on. "I would expect further increases in February and March as buyers look to take advantage of the scrappage extension as well as racing to get new registration plates in March. "For the industry to balance the decrease in private sales as scrappage ends, the corporate car market must grow. Looking at total registration figures over the past two years, the number of corporate cars has decreased from 56% to 49%, while private demand has grown thanks to scrappage. If, as UK businesses pull out of recession, corporate and fleet registrations increase this will help take this figure closer to the long term average of 60% of total sales. This could help boost total annual numbers to the upper end of the forecasted registration figure of 1.8-1.9 million."