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Buying trends: Cars explain the euro saga

By Jay Nagley, Redspy Automotive

If you are feeling baffled by the complexities of the euro crisis, you are in good company – there is precious little evidence that European politicians have got their heads around it either.

However, one look at what has happened in the UK car market since 2002, when the euro was launched, and today provides a microcosm of the general problem.

The idea back then was that European countries would lock their currencies together so that they could march in step towards ever greater economic prosperity.
One look at the graph shows what actually happened.

Germany promptly marched in one direction, while most other countries hobbled off in the opposite direction.

In the 10 years of the euro, Germany increased its share of the UK market by almost exactly one-half.

In contrast, Spain’s share fell by around one-fifth, France’s by around one-half and Italy’s by around two-thirds.

On the face of it, well done Germany. We can hardly be forced into buying Fiats instead of VWs, just to support a country so misguided that it thought Berlusconi was a suitable prime minister.

That is Germany’s line: everyone else should be more like them.

However, there is a problem. Because other Eurozone countries cannot devalue to compete with Germany, Germany sells more and more cars (Germany is actually now a cheaper place to make cars than France or Italy) while France, Italy and Spain sell less and less.

If that continues indefinitely, no one in those countries will be able afford a German car and then even Germany loses out.

Meanwhile, what of the UK?

The closure of factories by Ford, Vauxhall and Peugeot has severely reduced our domestic market share, although our strong exports from the Japanese transplants has softened the blow somewhat.

UK domestic market share fell sharply until 2008, when it was down to 13.7%, but it has stabilised since.

That is good news to some extent, but it is like the overall economy: the Government wants the manufacturing base to grow, but it is starting from a greatly reduced base.

It is ironic that Japan came under huge pressure to open factories over here when its UK market share was 11% (Japanese made cars are now down to just 4.3% market share).

Apart from BMW with Mini plus its Birmingham engine factory, there is no production in the UK from German car companies, despite its market share rising past one-third of all car sales.

However the world has moved on, and there seems no prospect of a trade delegation to Wolfsburg asking for a new VW factory to help out a depressed northern city.

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