BRITAIN AND THE BOOM—II CAN MARKETS BE FOUND FOR HUGE CAR OUTPUT?

Press, Volume XCI, Issue 27592, 24 February 1955, Page 12

BRITAIN AND THE BOOM—II CAN MARKETS BE FOUND FOR HUGE CAR OUTPUT?

[By

RICHARD DENMAN,

of the -Economist"}

London, February 2.—Britain’s car manufacturers broke all year, turning out over I.OW«W vehicles for the first time. 00ft rars were produced (against 595 000 in 1953) and 270,000 commercial vehicles <240,000 in 1953) By Decernber one new car was rolling off ish assembly lines every 10 seconds of the working day. Exports were also buoyant, 366,000 cars and 127,000 commercial vehicles were shipped abroad last year, 64,000 Tnd 15,000 more respectively 1953, and the value of these exports reached £340,000,000, ** of £40,000,000. Car exports are now running at a rate which covers about six weeks* imports of everything we buy from overseas. A particularly striking result was in the sales of tractors to the IJhitea States, which yielded £ 3,250JX)C1 last year against less than £ 1,000,000 in 1953. Other good customers wer,e New Zealand, Australia, South Africa, Eire, Sweden, and Portugal. At the same time a record number of cars were sold on the home market--about 400,000, or 20 per cent, more than in 1953.

Vast Development Planned Far from resting on its laurels, the motor vehicle industry is set to press on to further achievements. By 1960 a further increase of no less than 50 per cent, in output is planned, which would bring production up to 1,500,000 vehicles a year. Fords plan to spend' £65,000,000 on development over this period and Vauxhalls expect to invest £36,000,000. The British Motor Coiporation (Austin and Morris) will extend their plants to a capacity of 650,000 vehicles a year, and the Rootes Group also have schemes for expansion. These immense programmes raise the question whether markets for all these vehicles will be found. Can 6,000,000 new cars and 1,750,000 commercial vehicles be sold, by 1960? The problem can be divided into home and export aspects. At present there are about 2,500,000 cars on our roads, of which 300,000 belong to businesses or are in the hands of dealers. The main factors which will decide whether this number will grow are:—

1. The general level of incomes. 2. The cost of cars, and the future of purchase tax.

3. The trend of running costs and, in particular, petrol tax. 4. More rapid replacement. Today only 1,000,000 of the 19,000,000 persons earning less than £650 a year own a car. On the other hand, more than 1,000,000 of the 3,000,000 who have a larger income already possess a car; and so future extension of car-owner-ship depends on an increase in the number of people who can afford to buy one. Lower costs could help bring this about; but it must be admitted that substantial cuts in purchase and petrol taxes do not seem likely for the next year or so. There

is some evidence that replacement has been speeded up as production for the home market has expanded; but now - the shortage of the earlier post-war years has been largely overcome, British motorists as a whole are not expected to take to the American habit of having a new car nearly every year. The best estimates that can be made suggest that there will be 4,000,000 cars on the roads in 1960. * If the scrapping does not rise greatly, this would mean that home sales in the next six years will amount to about 3,000,000 cars. The Export Markets This leaves 3.000,000 —or 50 per cent. —of our expected output to be exported. We are at present selling half of our production abroad; but if production rises we will have to sell something like 570,000 cars in 1960 against 366,000 in ~ the favourable conditions of 1954. This is an increase of nearly 60 per cent. It is certainly improbable that total world demand will grow by this amount in six years, even given the maintenance of boom conditions throughout the world. So, whether British car manufacturers’ optimism is justified will depend on their success in competing with foreign makers. Our share of world sales is now about 40 per cent; this will have to go up to about 50 per cent. Germany will be the main competitor; and American models will also be a threat if convertibility is achieved in the next few years. German exports grew by no less than 67 per cent, last year, and almost 300,000 vehicles were sold abroad, of which 185,000 were cars. Clearly, we will have our work cut out to beat off their challenge, which is growing at such a formidable rate. Challenge to Manufacturers Unfortunately, there are still signs that our manufacturers are being rather slow to adapt their models to the requirements of overseas consumers; in particular, we are not producing “baby” cars competitive with the French Citroen and Renault models, which are consequently gaining markets from us. Many of our models are also not well suited to the conditions in which they are expected to be used in many Commonwealth markets; and there are complaints that cars are being offered that are often too large and too expensive to be able to capture anything of a mass market. This all adds up to a big questionmark over the future of the car industry. If expansion plans are carried out and output rises at the expected rate, only a big growth in exports will avoid the dumping of cars in the home market. One further difficulty to be faced is that our best markets are also the most vulnerable, and liable to make big cuts in imports almost overnight as Australia, New Zealand, and South Africa showed in lt is up to the car firms to prove ffieir point.