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Can The Car Industry Recover After More Job Cuts Announced?

As new and used car showrooms start to reopen again with the required Covid19 government safety requirements in place, like social distancing for example, some dealerships like Lookers and Aston Martin have just announced they will be cutting jobs and closing showrooms around the UK.

Car Showroom

It follows the ‘Society of Motor Manufacturers and Traders’ (SMMT) announcement that the number of new cars registered in May was the worst performance in the motor trade since 1952.

Lookers Chief Executive Mark Raban said, “We have taken the decision to restructure the size of the group’s dealership estate to position the business for a sustainable future, which regrettably means redundancy consultation with a number of our colleagues.”

Uncertainty in the motor trade industry has not been helped by the possibility of the UK leaving the European Union without a trade deal.

For example, Nissan’s vehicle manufacturing plant which employs 7,000 people in and around Sunderland, will not be sustainable under a no-deal Brexit the company reported to the BBC.

This recent car industry crisis began back in February 2020, when the Coronavirus outbreak in China forced factories to close, which meant sales in one of the biggest global markets collapsed.

The UK motor trade industry has been on hold ever since, showroom doors have remained closed and factories producing thousands of cars for sale each month have been sitting idle waiting for some positive news.

Car manufacturing companies are accustomed to halting production lines now and again, for maintenance or producing new model lines for example. But reopening the factories this time around will be a far more challenging prospect.

The three main concerns for manufacturers are the availability of parts and supplies from abroad, showroom demand from customers, and the health safety of staff and customers. When UK dealerships were closed it was no surprise that the first factories to restart production lines again were supplying markets abroad.

Chairman of Ford Britain Graham Hoare said, “Dealerships being open is a fundamental requirement to selling cars, the vast majority of our products go through dealerships.

Opening those dealerships, that really unblocks the cork out of the bottle that then allows the whole manufacturing system to flow.

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Now the UK motor trade sector has now been given the green light to get back to business, manufacturers can get back to producing new cars again, and dealerships can start planning for customers to test drive these vehicles on trade plates, assuming the correct motor trade insurance policy is in place.

But it may take a long time for consumers now unsure of their job security to start purchasing big ticket items like new and used cars again.

In China vehicle sales have started to increase, but the customers will only purchase vehicles if they can afford to buy them, and with the world economy expected to go into recession, that position cannot be guaranteed.

“Invariably, if consumer confidence is low, you’re looking at tightening belts,” chief executive of the SMMT, Mike Hawes said.