The latest quarterly analysis of the automotive market by captive software specialists White Clarke Group (WCG) and Professor Peter Cooke has warned of "reduced cash flows and challenged profits".

The report – When Will Sustainable Economic Recovery Really Begin? – is authored by Professor Cooke of the Centre for Automotive Management at the University Of Buckingham Business School and available for free download.

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According to the report, European new car registrations, including fleet and business, which started at 15.1 million units in 2003, peaked at 16 million in 2007, and dropped to 13.6 million in 2011, are only being kept afloat by "unsustainable cut price deals and wide-spread scrappage programmes."

The report highlights the schism between UK and continental attitudes to scrappage schemes with France, for instance, proposing a second round of the programme, something which UK Business Secretary Vince Cable described as "expensive" and "unnecessary" on the BBC’s PM programme last week.

Europe and fleet

The report notes that if the sterling-euro balance remains and European sales continue their nosedive, the UK should expect manufacturing bases in the Czech Republic and Romania to be building more right-hand drive cars and flooding the market with cheaper cars.

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The report also makes a conservative estimation of 1.94 million new registrations in the UK in 2012, compared to 1.97 million predicted by the Society of Motor Manufacturers and Traders (SMMT) in July and just shy of two million extrapolated by Motor Finance magazine based on September figures.

Should this prove true, and with the UK car market tied to the national financial crisis through finance providers, the report wonders if the current situation "offers manufacturers’ finance houses the chance to grow market share as honest brokers selling finance to fund cars, rather than using it as a means to offer a clutch of other services".

Moving the opposite way in the relationship, the overall economic situation has seen vehicles being retained several months longer and has stifled the pressure to add to fleets. In response to which the report recommends any new scrappage scheme in the UK could focus on light commercial vehicles, rather than cars.

richard.brown@vrlfinancialnews.com