Incredible as it may seem given the state of new car sales in the UK, new car prices are set to rise within the next few weeks by an average of 5-6%. The main reason for this, according to most commentators, is the increasing weakness of Sterling against the Euro. This would seem to indicate that although demand for raw materials worldwide has declined alarmingly, car makers are using the currency issue as a smokescreen to try and recover lost revenue. Car manufacturing is obviously heavily reliant on steel, rubber glass etc and as less cars are being built globally these materials, along with oil have become much cheaper, indeed oil is now approx $47 a barrel compared to $150 at its height last year.
So can car manufacturers given the current situation of idle time, redundancies and global factory closures really afford to alienate potential buyers and their beleaguered franchises with more bad news? Dealers are already starting from a heavily discounted product and stifling standards imposed on them leading to massive pressure on volumes and profit margins. Car makers really need to inject some enthusiasm and incentives through their dealer networks in order to kick start new car sales and raising the price of the cars no one seems to want should probably not be one of them. Most dealers have severely re-calculated their forecast for new car numbers and profit, the last thing they need is to try and justify increases in price in a depressed market and to be blunt sales people on the front line are surely not equipped to overcome that kind of objection.