The auto industry's reaction to the 2012 Budget

Thursday, 22 March 2012 12:15 PM

Ford Fiesta ECOnetic

The Ford Fiesta ECOnetic uses the latest eco-tech to trim the price of motoring. We saw around 60mpg during a recent, week-long Fiesta ECOnetic test drive...


The front pages today are bulging with a head-spinning amount of information about the 2012 Budget - it looks like we'll be working until we're 70, there are some tax cuts for people on big salaries and some cool-sounding grants for animators so we can keep the likes of Wallace And Grommit proudly British.

But what about the beleaguered British motorist? There has been widespread reaction from different parts of the auto industry to the budget. Here is what a few of them had to say about it all - it's no surprise that the rise in fuel duty is proving to be somewhat unpopular but there are a few glimmers of hope amongst the gloom too.

There is a mixed reaction from the Association of Car Fleet Operators (ACFO) with chairman Julie Jenner saying changes in company car tax rates and capital allowances will drive fleet managers and drivers into cleaner, greener vehicles at a faster rate.

“The Government’s decision to tighten company car tax rates by one percentage point up to the end of the 2014/15 tax year and then by two percentage points in 2015-16 and 2016-17 means that the lowest CO2 emitting vehicles will find their way on to fleet choice lists in a bid to keep tax bills in check," she said. “Additionally, the Chancellor’s decision not to extend 100% first year capital allowances on low emission cars to leased models may well see some fleets reconsider their options in relation to these vehicles. However, detailed financial modelling will have to be undertaken to calculate the impact of such changes.”

However, Ms. Jenner says she is "disappointed" at the rise in fuel duty. “ACFO had called for the duty increase not to go ahead as, with fuel prices already at record levels, the rise will further impact on business costs,” she said.

David Shelton, managing director of Motorpoint, an online car dealer, is also disappointed in the rise in fuel duty, saying that as a result of rising fuel prices 80% of visitors to the Motorpoint website are taking less car journeys as a result. He is also worried about the impact of possible plans to add more tolls in a bid to privatise parts of the UK road network, an idea that has also proven unpopular with Motorpoint site users.

“The fuel duty rise in August will certainly mean a rise in fuel prices, which is bad news for the everyday motorists who are being seriously affected by increasing fuel costs," says Mr. Shelton. "What we want is for people to enjoy owning a car again without the burden of heavy taxes, which will in turn stimulate the economy."

The Society of Motor Manufacturers and Traders chief executive Paul Everitt was largely upbeat about the budget and feels it is good news for the UK car manufacturing sector: “The Chancellor’s actions to improve R&D tax credits and develop a catapult for transport systems and future cities will help trigger substantial extra business investment in the years ahead. The UK automotive industry is attracting major levels of investment and creating real opportunities for engineering and manufacturing businesses."

Ian Stuart, group managing director of Birmingham-based tyre specialist ATS Euromaster, said: “Today was a golden opportunity for the Chancellor to reach out to British business by scrapping the planned fuel duty increase. The Government could have used the additional tax generated by record fuel prices to offset the planned rise in duty.

The Freight Transport Association (FTA) is also raging against the increased fuel duty with their chief economist, Simon Chapman not mincing his words, saying the Chancellor has "squandered a very real opportunity to support UK industry, jobs and economic recovery" but the 3p per litre August fuel increase will "increase the average cost of lorry operations by around £1,200 per vehicle, per year."

But on a happier note, the FTA welcomes the announcement that Vehicle Excise Duty levels for commercial vehicles will be frozen.

The British Vehicle Renting and Leasing Association's chief executive John Lewis also has a mixed reaction to the budget. Like others in the auto industry, he is not best pleased with the planned fuel price rises and adds that the Chancellor's "enthusiastic efforts to drive down emissions-based capital allowances for company cars could be a step too far, too soon".

“The fleet sector is the only part of the new vehicle market that is still growing at the moment. It will adapt to the new tax regime as it always does, but these ambitious targets could bring a temporary stall to the market as businesses re-evaluate their fleet policies,” said Mr. Lewis.

He is also unsure about eliminating the company car tax exemption on electric cars from April 2015: "The Chancellor is getting rid of one of the main incentives for fleets to operate them. This measure could kill the electric car market stone dead.”

“The only way out is for manufacturers [of electric cars] to slash their prices, which they have so far refused to do.”

He welcomes the continued freeze in VED for all commercial vehicles over 3.5 tonnes but is unsure as to whether this will offset the rise in fuel prices. He also applauds the National Loan Guarantee as an attempt by the government to help British businesses, including keeping their vehicles on the road.

In the midst of all this talk of higher fuel prices squeezing British businesses as well as the humble private motorist, it is perhaps timely therefore that an intriguing email from Ford has just landed in the TotallyMotor inbox - the latest Ford Fiesta ECOnetic model is now on sale and its diesel engine has an exceedingly frugal combined fuel economy of 85.6mpg. Add to this CO2 emissions at a Congestion Charge-beating 87g/km and we may just have one of the few cars we can all afford to run in Britain.

We’ve test-driven a Ford Fiesta Titanium ECOnetic 1.6 Duratorq TDCi 95PS quite recently – here - and saw around 60mpg...


By Georgia Lewis

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