The UK Government must keep a focus on the health of the nation’s automotive industry which keeps around 800,000 people employed and contributes billions of pounds to the economy – that’s a call from the Society of Motor Manufacturers and Traders (SMMT).
Its chief executive Mike Hawes talked to Automotive Management earlier this week and highlighted the costs to OEMs of trading in the UK, including the discounting and marketing required to drive electric vehicle sales growth faster than natural demand in line with Government policy.
Hawes has lauded the new car market’s return to the two million units mark, but noted that this is still below the level at which the market is regarded to be in good health – typically around 2.2m units.
Too few private motorists have the disposable income or confidence to buy a new car currently, as they manage expensive living costs and as few low priced A-segment and B-segment cars are available – although more are now reaching the market. That means that the UK’s car parc is getting older. The average age of cars on the road is now 10 years, compared to eight years at the start of this decade.
Hawes has called on ministers to launch an early review of their ZEV Mandate policy, which the SMMT believes led OEMs to spend some £5bn on discounting in 2025.
The trade body is also concerned that such “unsustainable” costs will influence OEMs’ broader strategies for the UK.
“What worries us most is the cost of doing business in the UK. If you’re an investor, or considering investment, you’re clearly going to look at the operational costs of those investments in the UK. That is simply what it costs to produce that vehicle. How easy is it to access the markets in which you want to sell, and what are the barriers.
“I think a lot of exisiting investors are looking closely at this mandate and seeing this is an huge amount of money at a time when they are struggling to be operationally viable with the costs of energy and other costs that have been borne in the last five years, and given the changes in Europe it makes us look less competitive.”
Asked about the ongoing motor finance commission work by the Financial Conduct Authority, and the messages to car buyers that they’ve been ripped off by motor finance since 2007, Hawes said that although SMMT does not represent captive finance firms he could see that anything which creates a perception of consumer detriment is not good for any industry.
The OEMs are watching carefully, and he said it is a concern for them because a redress scheme which impacts their captive lenders will be yet another additional cost of doing business in the UK.
Hawes said: “When you have a reputational hit like that, it’s not a good thing for the sector as a whole, wherever the fault lies.”
The motor finance sector has pushed for the FCA to adopt a redress scheme which is workable and which compensates only those consumers who have actually suffered loss. The outcome of the FCA’s consultation and its rules will be published this spring.
Last month FCA chief executive Nikhil Rathi confirmed the FCA is examining evidence from captive lenders that argue disclosures were adequate, and the regulator is also considering feedback on anomalies, including cases involving 0% interest where respondents argue compensation may not be due.
Hawes was quite upbeat that Kier Starmer’s government is listening to the automotive industry. The Electric Car Grant is a positive step, albeit one with limitations, and the fact that Starmer launched the UK’s Industrial Strategy at an automotive business complex last year showed that ministers are engaging with the sector.