The current government often speaks of the importance of manufacturing to the nation’s balance of payments. Business Secretary Vince Cable has led government in this area, and has turned up to his fair share of factory openings and extensions over the last two and a half years – and many of these have been expanding car plants.
Of these, both luxury and mass production cars have done well. But as a developed nation, is there a difference between the viability of high end autos and mass-produced cars? Are emerging economies better suited to mass production cars?
The evidence appears to suggest that high-end manufacturers are having an easier ride during the economic hard times. Order books for McLarens, Aston Martins and Range Rovers are very healthy. In other parts of Europe too, brands like BMW, Audi and Ferrari are doing well.
Conventional carmakers are, on the other hand, not doing so well. Honda has recently announced several hundred job losses in its Swindon plant, and Peugeot’s workers are facing equally bad news. Ford too has announced closures.
Some might say that this downturn is in part due to cheaper labour and easier access to raw materials in places like south east Asia, resulting in the ability to produce more affordable, yet equally good, cars. But in truth European mass production facilities have invested so much into improving efficiency that they compete well on price.
The problem for Europe’s mass production car makers is that Europeans simply aren’t buying their cars. But this drop off in demand is also being experienced by non-European brands, including Asian marques being manufactured right here – such as Honda in Swindon and Nissan in Sunderland.
With this situation in mind, it’s easy to see why luxury and high-end cars and off-roaders are doing better than more commercial cars. The nouveau riche of India and China are not interested in importing Vauxhalls, Opels or Fords. They want mementos of their success: this means Land Rover Evoques, and high-end Audis and BMWs. For those who have made even more of a mint, there are Ferraris, Lamborghinis and McLarens to choose from.
Until middle class Europeans start feeling richer and start buying their own mass production cars, there appears to be no safety net – no breakdown cover for Europe’s big car makers.