Car slump may slow Japanese build-up in UK

THE SLUMP in European car sales could force the Japanese to slow the production build-up at their British transplant factories, a new report claims.

The consultant DRI/McGraw-Hill says in its latest automotive forecast that a 16 per cent fall in European demand in 1993 has encouraged the European Commission to reopen negotiations over the level of Japanese imports.

It is pressing Tokyo to accept a 16 per cent reduction on vehicle exports this year rather than the 9.5 per cent agreed in April last year. 'An attractive option for the Japanese may be to slow the growth of transplant production in Europe and so limit the reduction in vehicle exports from Japan at a time of falling output levels in Japan,' the report says.

This would be a serious blow to the UK, where Japanese factories are concentrated. The Nissan, Honda and Toyota plants in Britain are expected to produce 335,000 vehicles this year, compared with 180,000 in 1992, providing one of the few bright spots in UK manufacturing.

The report says the collapse in European sales this year will be sharper than it was during the 1974 oil shock. Only British sales will rise, by 11 per cent, while the German, Italian and Spanish markets will all contract by more than 20 per cent.

Volkswagen is the most exposed of the big six, as 70 per cent of its sales are made in Germany and Italy. Its 1993 sales are likely to fall by 500,000 units. The only volume manufacturer that will avoid a drop of more than 250,000 is PSA, thanks to a strong performance by Citroen. Multi-purpose vehicles such as the Renault Espace are also bucking the trend, with sales growth of at least 10 per cent forecast.

Production as well as sales will fall in every European country except Britain, where output should grow by 8.4 per cent. German production will fall by more than 1 million vehicles, while that in Spain will fall to its lowest level since 1985. 'Overall, West European production is expected to fall by 2 million units or more, implying further redundancies and short- time working,' DRI says.

Although the market is forecast to recover by 3 per cent next year, European manufacturers will find themselves facing strong competition from the Japanese transplants, which means they will have only half the market growth at their disposal.

DRI says world car sales will contract by 3 per cent this year, thanks both to the European collapse and a 6 per cent fall in the Japanese market.

North American sales should rise by 5 per cent, with the only real buoyancy in Latin America and Asia Pacific, where sales will increase by 20 per cent or more this year.

In the next five years, much of the 20 per cent rise in world demand will come from non-traditional areas, with South Korea, China, Thailand, Latin America and Eastern Europe offering the best prospects.

----------------------------------------------------------------- Table: Car sales: Gloom ahead ----------------------------------------------------------------- Registrations/sales (thousands) 1992* 1993** 1994** 1998** North America 9,181 9,550 10,136 10,684 Japan 4,454 4,192 4,287 4,910 Germany 3,929 3,063 3,001 3,633 France 2,105 1,776 1,889 2,370 UK 1,593 1,768 1,889 2,344 Italy 2,374 1,866 1,795 2,289 Spain 979 720 812 1,138 Western Europe total 13,494 11,324 11,656 14,324 World total 34,050 32,995 34,818 41,324 ----------------------------------------------------------------- Notes: * Actual, ** ForecastSource: DRI/McGraw-Hill -----------------------------------------------------------------