1960s >> 1961 >> no-684-august-1961

Editorial: Crisis in the Car Industry

Although the car industry has managed to make some recovery from last year’s slump, its effects are still being felt. In spite of all the optimism a few months ago it is now clear that output is not going to get back to the previous high levels for some time to come. As for exports, the outlook is not bright at all and much of the manufacturers’ former confidence about prospects has evaporated.

The pre-war seasonal sales pattern, high in the spring and summer, and low in autumn and winter, seems now to have re-established itself. There may well be further difficulties later this year, therefore, as the graph turns downwards. Nor are manufacturers reassured to hear of the various dire measures which the Chancellor of the Exchequer is said to have ready once the 1961 Finance Bill has become law—an increase in the purchase tax on cars is hardly likely to improve their sales prospects.

A further worry is, of course, the Common Market. If Britain stays out it means the end of any hopes to step up sales in Europe since the ever-increasing tariff against countries outside the Market will put British prices completely out of the running. If Britain goes in, the position may hardly be any better since British cars will be open to the full blast of European competition.

Even the second-hand car market is feeling the pinch. Recent large-scale hire purchase defaulting has made the finance companies jittery. Deposits have gone up and interest rates are due to follow. The result has been that many firms have gone out of business or are on the point of doing so.

The situation is hardly different elsewhere. American car production is still bumping along the bottom, with little sign of an upturn. Output in France and Italy is down. In Germany, Volkswagen is still apparently doing well, but Borgward has run into difficulties and may be forced to go out of business altogether. The tempo everywhere has slackened off compared with the hectic scramble of 18 months ago when the U.S. market in particular was wide open to the exports of the European small car manufacturers. This is the present situation. What of the future? It is certainly going to see many bitter struggles.

Like Britain, every one of the other major national producers has large-scale expansion programmes ahead. Some firms are already far advanced with their plans and almost ready to go into production —Volkswagen in Germany, Citroen in France. Fiat in Italy. Others, such as Renault in France and Lancia in Italy, have also actually started work on their big new projects and until recently, at any rate, were pushing them ahead with all speed. Further to these. Alfa-Romeo in Italy has just begun building an important new plant near Milan and Peugeot in France has recently bought a large piece of land near Mulhouse for a further factory. No doubt all these firms are wondering, like their British counterparts, whether all this projected expansion is going to be worthwhile.

At the same time, every manufacturer without exception is working hard on the production of up to date models, constantly introducing new developments in techniques and design All of them are striving continually to discover the secrets of their competitors and to go one step further. If they do not do these things they will just be left behind in the race.

The Daily Mail recently interviewed Sir Leonard Lord, the Chairman of the British Motor Corporation. One of the things they said to him was: “You are raising capacity from 750,000 to 1,000,000 cars a year. Do you think next year you will be able to sell 18,000 cars a week”? He smiled broadly, raised both his hands, and showed two sets of crossed fingers. Which, come to think of it, is a pretty apt comment on not only the car industry—but capitalism itself.