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FULL ARTICLE | EDITORIAL 
Pounding pressure, slowdown ahead? 
Peter Schmidt | Editor

Published: Fri, 07th October 2016 13:02:14 GMT
 

UK Brexit Pound Slow down Septmber car sales


Open quote signHappy days. Septemberís UK car sales grew for the 8th month this year, and comfortably topped year earlier sales in 53 of the past 55 months. Howís that for a sustained growth record? Brushing aside the idea that this non-stop run of multiple marathons from Britainís consumers is about to give way to the expected long pause for breath, and given that car loans havenít been this easy in decades, Septemberís car sales set yet another all-time record for this particular month.

Britainís consumer's, after powering Europeís car sales locomotive for the best part of five years, are clearly determined to continue their spirited car sales marathon with near unchanged vigour. 

Regardless of Juneís shock-horror Brexit vote, nearly four months further down the road, thereís not even the faintest whiff of the earlier anticipated toxic fallout.

 Carmakers should be a happy bunch. 

All hunky dory then? 

Not quite. Thereís just one major wrinkle to this otherwise happy story. 

With Ďhard Brexití fears lingering, the pound is taking a hammering. 

The consequence? 

Short term hedging, for example, will help to damp the softening pound shock. 

But sooner rather than later thereís the likelihood that a large chunk of these hedges will expire. 

Bad news for a nation of seemingly tireless shoppers. 

If not this year, then next year, they face the prospect of significantly higher prices. 

And that is expected to damp their spirits a great deal.

Yesterday, against the dollar, Sterling slumped to a 31-year low. 

Against the euro it plunged to a 5-year low, after losing close on 16 per cent of its value since the EU referendum. 

Pound down, car sales up, spells bad news on the key profit front. 

Sterling news will have sent a shiver down the spine of Britainís car importers. 

The same goes for UK-based carmakers, because a huge chunk of the parts used in their UK-manufactured cars is shipped in from across the channel. 

Behind an outwardly confident facade, most needles on the UKís autoindustry dashboard are now gradually beginning to point the wrong way. 

Yes, in cold statistical terms 2016 has indeed turned into a far, far better car sales year than feared. 

Take a closer look at September numbers and itís not quite what it seems. 

Volkswagen for one is pulling on the brakes. 

Same goes for its SEAT offshoot. 

Equally unsurprising, demonstrating like Peugeot-CitroŽn that sales volume is not crucial for making real money in todayís car business, Ford and to a lesser extent Nissan and Toyota also hit the brakes. 

Against that landscape, encouraged by the impressive financial turnarounds at PSA and Fordís fast-recovering European offshoot, behind corporate walls a growing chorus of autoindustry bigwigs will demand an end to unprofitable sales. 

Britain's sustained new car bonanza, fuelled by juicy deals on wheels, ultra-low interest rates and strong sterling, is now on borrowed time
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