When the economic recession hit the UK in late 2007

When the economic recession hit the UK in late 2007, dozens of industries faced an uncertain future. Industries that had grown used to continual growth and expansion suddenly found bad debts piling up as markets shrank and reversed. Among those industries was the motor trade. Independent and franchise car dealerships, manufacturers, mechanics and even motor trade insurance providers were all worried about the future of this industry in the UK.

Thankfully the Government’s scrappage scheme provided a timely boost to the ailing industry – but was it enough?

As the scrappage scheme draws to a close, it has prompted a sudden spike in new car sales; 38.9% new cars were registered this December, and 20% of these were part of the scrappage scheme.

However this spike in sales doesn’t prevent the unwelcome fact that 2009 was the worst year for the motor trade industry in 14 years.

Overall, car sales for 2009 were 6.4% less than in 2008. It was the first time since 1995 that fewer than 2 million new cars were registered in a year in the UK. We were only 5,000 units off – but still, a landmark moment that should spell out the changed environment of the motor trade industry.

With the scrappage scheme drawing to an end by the mid-point of the year and customer spending still limited by the recession, the car industry shouldn’t expect to ‘return to things as normal’ in 2010. This isn’t the year that the motor trade makes a dramatic recovery and continues to grow – the numbers for the past decade were obviously unsustainable.

The truth is that until the 1990’s economic boom, car sales were regularly below 2m per annum. Although it lasted for more than a decade, the growth that the motor trade experienced, with hindsight, was never going to last forever.

For everyone in the industry now, the challenge is to make the most of what remains of the market; whilst ‘recovery’ seems unlikely by the standards of the 90’s/early 2000’s, the market also appears to have recovered some measure of stability.

A recent AA survey suggested that more people will be looking to buy a new car in 2010 than in comparison to last year. This shouldn’t be too surprising as, after all, most new car buyers weren’t eligible for the 10-years-old criteria for the scheme. But the new emphasis appears to be on affordable cars, rather than the prestige brands and luxurious features that marked the last years of the economic boom; nearly a quarter of those surveyed said they were looking to spend less than £5k on a new vehicle. This echos the trend in related when increasingly consumers are favouring insurance comparison quote websites to find the best value for money when it comes to insuring their new vehicle.

2010 may not be the year the motor trade “recovers”, but it is the year that the downward trend will probably reverse. Its a year where the market will more stable and where car buyers will be looking for affordable alternatives – such as used cars. Used car trader Carsite.co.uk reports that it saw a 112% increase in sales over the last months of 2009, and those in the motor trade industry would do well to follow its lead.