Motor production declines despite scrappage

Car production was down again in May, although the month did witness the smallest drop of the year.

Production in the UK was down 43 per cent on last year, with commercial vehicle production down a huge 73.5 per cent.

The Society of Motor Manufacturers and Traders (SMMT) said the "outlook remains difficult, but positive signs are evident as manufacturers restart production with scrappage schemes lifting orders".

The scheme was introduced following this year's Budget to give car buyers a £2,000 discount when they trade in their old car, which must be at least ten years old.

While manufacturers welcomed the scheme, with many saying car buyer interest had increased considerably, the SMMT said the scheme would need more time to translate into sales and improve the position of the beleaguered motor industry.

Paul Everitt, SMMT chief executive, said: "Prompt action by manufacturers to realign supply with demand has been painful, but was necessary. There is now a direct link between demand in the marketplace and production volumes.

"The scrappage schemes in place across Europe are now beginning to have a positive impact, although the full benefits will take a little longer to flow down to companies at all levels in the supply chain."

In May 67,754 cars were produced according to the SMMT, while only 4,692 commercial vehicles were made.

"Commercial vehicle production is severely affected by low business confidence and economic uncertainty. Businesses across the economy are still holding back on new expenditure and will need to see better access to finance and stronger domestic demand," added Mr Everitt.