UK car sales boom raises industry hopes

Car sales jumped by almost 15% in April compared with the same month last year, defying a slump across Europe

Car sales in the UK continue to storm ahead, defying the present economic climate and in contrast to the dire markets across Europe.

Car sales jumped by almost 15% in April compared with the same month last year and are 9% higher in the first four months of 2013. Sales to individuals drove the numbers higher, with private sales up 32% compared with April last year.

Volkswagen has warned that the European downturn could hit the group's profit in the coming months

 Britons have been attracted by bargain deals on new cars, as well as attractive financing packages. Some motorists have also been prompted to buy more fuel efficient cars because of high petrol prices.

Analysts say there may also be pent-up demand. Howard Archer of IHS Global Insight said: "We've had bad economic times for an extended period. A lot of people have delayed buying new cars, so more and more people are getting to the stage where their cars have had it."

The figures are an encouraging sign for the UK economy. Archer said: "It does lift hopes that consumers are prepared to spend on big items."

But he noted that the car market has outstripped the wider economy for some time now. Last year, new car sales rose by 5.3%, while the economy inched ahead by just 0.3%.

Despite the buoyant start to the year, Archer said the car market faces difficult conditions in the coming months: "A serious concern for the industry is that consumers could rein in their spending on big-ticket items over the coming months as their purchasing power is squeezed by higher consumer price inflation and muted wage growth.

"There have also been recent signs that employment is stuttering after growing markedly through 2012."

Companies are also under pressure to contain costs and business confidence remains fragile. Archer said: "A worry for the car industry therefore is that many fleet operators and businesses will delay replacing vehicles to help contain their costs in an extended weak and uncertain economic environment."

The health of the UK car market stands in sharp contrast to Europe, where sales slumped by more than 10% in March. Analysts were particularly concerned by a 17% slump in new car sales in Germany.

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Article source : http://www.guardian.co.uk