Inside the industry: Incentive schemes alone won't save car makers

While the world   is collapsing around it, the European automotive industry marches on, with registrations down just 2.2% year on year across the region in July – and up year on year in Denmark, France, the Netherlands, Norway, Spain and, of course, the UK. So all is fine and dandy, then? Well, of course not.

Even if the fair wind keeps blowing, the market is still predicted to be down 24% over the course of the year, putting the backs of some car makers and many retailers against the wall. Who’s in trouble? It’s hard to ignore the paralysis at Jaguar Land Rover right now, and Fiat, Renault and Nissan have been hit hard.

But this unexpected turn of good sales news delivers some respite from the catastrophic results of March to June, when even doing nothing was draining reserves. Volkswagen CEO Herbert Diess estimated that idling most of the firm’s 61 global production plants cost it close to ?10 million per hour, while the average UK car dealer site – a decent barometer for counterparts in mainland Europe – was estimated to have lost ?125,000 in April to June. With roughly 4000 new car retailers in the UK, that equates to ?500m going down the pan here alone.

Most crucially, it gives car makers and car sellers a chance to turn stock into much-needed cash, and to turn their new and used inventories into hard sales. As regards new cars, most insiders reckon the positive news will need to keep fllowing until the end of September for the European market to have reset its stock levels and balanced supply and demand to where they had expected ending March pre-pandemic. Used car sellers, in contrast, are desperate for stock, supply having been strangled by lockdown as lease returns and auction sales dried up.

Within this data, there are mixed messages from the incentive schemes announced so far. France and Germany have had generous, EV-focused plans in place for a couple of months, with headline-grabbing savings, for example, making a Peugeot e-208 a €99-per-month reality over 48 months. That’s a ludicrous price, yet France’s registrations were up just 3.9% and Germany’s were down 5.4% in July.

Italy, meanwhile, showed why UK automotive officials are walking on eggshells whenever incentives are mentioned. There, a scheme was well publicised as launching on 1 August. Consequently, July’s figures were down 11% as everyone waited for a better deal. The evidence in the UK is that many are doing the same.

The irony is they might not get one. Right now, where there’s stock, there are great discounts. But as sales flow, stock is running down. Buyers might find that car makers simply use incentives to prop up profits rather than doubling down on consumer savings.

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