UK car production falls 31.5pc as fears grow over car scrappage scheme

A pick-up in new car production driven by the launch of the scrappage scheme ended in August, sparking concerns for the health of the industry when the Government's £300m programme ends.
One industry analyst claimed the incentive plan, which encourages consumers to scrap an old car for a new model, could run out of funding as early as next week and called on the Government to extend the scheme.

UK car production fell 31.5pc in August, ending a run of three consecutive months when the decline caused by the financial crisis eased.

The scrappage scheme had helped to turn a 56.5pc year-on-year drop into a 23.7pc decline by July by boosting consumer demand for new cars. However, production fell back again in August, which is a traditionally quiet month, as scrappage schemes across Europe began to end.

Nonetheless, the success of the UK scheme means that the proportion of cars being built in the UK for the domestic market has risen to a four-and-a-half-year high of 33.8pc.

However, Paul Everitt, the Society of Motor Manufacturers and Traders chief executive, said the recovery in the market is "extremely fragile".

Car makers have cut jobs and shifts as sales have slumped and further jobs are under threat at Vauxhall after a deal between General Motors and Magna. Jaguar Land Rover, which employs 14,500 people in the UK, yesterday announced plants to close one of its sites in the Midlands.

Lord Mandelson, the Business Secretary, yesterday warned the UK manufacturing could be a "loser" from foreign ownership in light of the Vauxhall situation and Kraft's approach to Cadbury. "I am keeping a weather eye on this area," he added.

Mr Everitt, who also called for the scrappage scheme to be extended, said: "Underlying demand remains weak and the recovery is still extremely fragile."

The Government's plan runs until 300,000 cars have been registered or the end of February. As of September 13, some 215,740 vehicles had been registered under the scheme and, with September being the busiest month of the year as new registrations are launched, David Raistrick, the UK manufacturing leader at Deloitte, warned it could end imminently and at the "wrong time" for the industry.

Meanwhile, Renault shares slid 2pc in France yesterday as the company continued to suffer the fallout from the "fake crash" saga in Formula One.

ING, the Dutch financial group, was the main sponsor for Renault's F1 team but it has demanded that its emblem be taken off the car.

Spanish insurer Mutua Madrileña has done the same, claiming that its "good name" could be threatened by association with the Renault team.