New Car Sales Dive

Cast your mind back a couple of years. Due to the credit crunch, the global boom in car sales hit the wall. Some of the biggest names in the car industry, General Motors and Chrysler, were effectively bankrupt. However, it wasn't just the sudden reduction of consumer demand that killed them. They had bet their businesses on continuing demand for large vehicles that generated a large profit but also had high fuel consumption. The oil price spike that accompanied the end of the consumer boom sent what few customers remained running in the direction of manufacturers of more frugal vehicles. GM and Chrysler were unable to adapt their business models quickly enough.

In a free market, a corporation that makes products that customers don't want to buy will go out of business. Not so in the auto industry, where governments in America and Europe bailed out their metal-bashers.

As a result, we have a car industry that is still tooled up to deliver the same volume of cars as it did in the years of the cheap-credit-fuelled consumer boom. As the Standard reports today, new car sales are still in a dive that has not been slowed by the new '60' registration plate.

You'll remember the £300M 'scrappage' scheme whereby the UK Government subsidized new car purchase.  If that £300M had been invested in green transport, home insulation or renewable energy, we'd have created more UK jobs, and we'd still be reaping the benefits in terms of lower energy bills and a lower carbon footprint. Instead of which, we've fostered car dependency and many of the benefits have gone to overseas car manufacturers. Meanwhile we've merely delayed a little longer the long-overdue downsizing of the car industry. The scrappage scheme was one of the last acts of a government that talked a lot about climate change, but did very little about it. It believed that unrestrained consumerism was the only way to run the economy. We'll see soon in the Spending Review how the Coalition's priorities compare.