The car scrappage scheme has put the brake on falling production volumes at UK assembly plants.
Figures from the Society of Motor Manufacturers and Traders showed that output fell again last month, but at a considerably slower rate.
A total of 107,635 cars were made in the UK in July 2009 – a 17.9 per cent fall on the July 2008 figure. This was by far the smallest monthly decline this year and was greeted as a welcome boost to the hard-pressed car industry.
However, the decline in commercial vehicle (CV) production showed no signs of easing in July, registering a fall of 59.8 per cent.
Car production for the year so far is 45.8 per cent down on the January-July 2008 total, reflecting the manufacturing cutbacks by car companies earlier this year.
CV production is down 63.8 per cent for the year so far.
The more encouraging production figures follow the heartening new-car sale statistics for July 2009 which showed the first monthly increase – of 2.4 per cent – since April 2008.
SMMT chief executive Paul Everitt said: “The slowdown in the rate of decline of UK car production reflects the impact of the scrappage incentive schemes in place across Europe.
“The UK motor industry is starting to stabilise but remains fragile. Industry needs the Government to deliver support through the automotive assistance programme and encourage banks to provide access to much-needed finance and credit.
“The CV market is suffering from depressed demand across Europe. This continues to affect the level of CV production. Furthermore, high stock levels mean that vehicle production may not recover as fast as the market.”
Chancellor Alistair Darling, speaking during a visit to a car dealership in Scotland, said: “It’s not surprising that in the teeth of a pretty severe downturn car production has gone down year on year.
“What we are now seeing, though, is an increase in production over the previous month and that is due to a significant extent to the introduction of the scrappage scheme.”
Amid signs of recovery in the new car market, Toyota is believed to be considering resuming full-time working (temporarily, at least) at its UK assembly plant at Burnaston, near Derby, which has been on reduced hours since April.
Toyota’s competitor Honda has recently resumed production at its factory at Swindon after a four-month shutdown aimed at matching output for demand.
In contrast, Jaguar Land Rover’s West Midland factories at Castle Bromwich and Solihull are ramping up production of new models such as the Jaguar XJ and updated versions of the Range Rover Sport and Discovery after cutting their summer shutdown from the traditional three weeks to two.
The Government said recently that the scrappage scheme was past the half-way point earlier this month with sales of 165,923 new vehicles.
The £300 million budget, enough to finance 300,000 new vehicles, is due to expire in March, or when the money runs out.
Ministers are coming under pressure to extend the scheme to alleviate fears of a second slump in demand.