UK vehicle production fell 43pc in May

The number of new cars produced in the UK in May fell dramatically, according to the Society of Motor Manufacturers and Traders.

May production was 43pc lower than in the same month in 2008 at 72,446.

Several firms have temporarily shut factories or cut back production to run down existing supplies after the downturn hit demand for new vehicles.

Impact from the Government's "cash for bangers" car-scrappage scheme is expected to take a while to show.

Earlier this week, government figures showed that more than 60,000 orders for cars under the UK's scrappage subsidy scheme had been placed since the initiative was announced.

Car buyers are given a £2,000 discount on a new car if they scrap one that is at least 10 years old.

David Raistrick, UK Manufacturing Industry Leader, Deloitte said, "I believe the scheme is an excellent mechanism to help support the sector, and the early signs of increased vehicle sales will greatly assist parts of the automotive industry.

"While the scrappage scheme is well intentioned and has evidently increased vehicle sales, many industry sources have commented to me that it is too blunt an instrument in its current form and lacks important environmental considerations, such as encouraging people to buy more fuel efficient vehicles.

Since the scheme was introduced, we have seen an upsurge in car sales, but as with the experience in Germany, this has been largely limited to smaller vehicles that are at the lower-end of the price spectrum.

The scrappage scheme is not having a widespread impact on the automotive industry as a whole, rather only a very limited percentage of UK manufacturers are benefiting and even then this is limited to a few vehicles within their range.

On the surface, these smaller vehicles would appear to be the most environmentally friendly options. This is not entirely true however as there are numerous mid sized cars which are more environmentally considerate.

"A more sophisticated version of the scheme would have been ideal, with further environmental aspects incorporated such as varying levels of government support dependent upon a car's CO2 efficiency. An extension of the scheme to incorporate vehicles up to 12 months old would also be widely welcomed by the industry".