Speaking at the UK launch of the Audi Q5—a new medium-sized SUV— John Zammett, Audi UK's head of press, was downbeat about the short-term health of the car market. He predicted a huge contraction in sales volumes during 2009. The industry body, the Society for Motor Manufacturers and Traders (SMMT) agrees. It is predicting that UK vehicle sales will fall below the magic 2 million mark next year (for the first time in over a decade). And residual values will take a further pounding as a result.
So how is Audi planning to react? While Zammett's job is all about talking up Audi, he offered little indication that the German firm plans to do much different as a result of the market upheaval. Audi's strategy appears to be to keep researching and developing, innovating and improving.
The company plans to have 40 models on sale by 2015, a quantum leap from the 12 it produced 10 years ago and a significant step up from the 27 currently on sale. With a research and development budget of about 2 billion euros a year and 10 new launches planned for 2009, there is little sign of the slowdown slowing Audi down.
Product quality counts for a lot in a tight market. As do intangible factors, such as brand values. Zammett touched on this by referring to the fact that "people want to buy an Audi at the moment, because it is a sexy brand." Part of the thinking behind pushing on to achieve a wider model range is that you are able to offer something for everyone, whether they are trading up or down.
Of course Audi only accounts for about five per cent of the UK car market. And it is at the volume end of the business that the greatest casualties will come. In the US, the heads of the three big car giants—Ford, General Motors and Chrysler—have been appearing before Congress to appeal directly for a slice of the bail-put money intended for the financial services sector.
Astronomical figures have been bandied around, including the most worrying that if they don't get some assistance, over 3 million jobs would be at stake. There is open talk of Ford and GM merging. But there is something essentially all-American about the car industry and the pressure for the incoming Democratic President Obama to act will be hard to resist.
But the calls for assistance are not restricted to the US. Here, the SMMT claims that 850,000 jobs are directly at risk if what remains of our car industry is allowed to fold. The problem is that by rescuing the banks, the case for state assistance in weathering this economic storm appears stronger. But it must be resisted. While the government should consider the SMMT's calls to delay or scrap plans to raise Vehicle Excise Duty (VED), it must resist any major handout to the UK car industry, not least because although the jobs are UK jobs, the firms taking the money are not UK firms.
It also sets an even more dangerous precedent than the re-capitalisation of the banks, which must be a one-off. If the UK car industry ends up with a subsidy from the UK government, then why shouldn't the Italians protect their shoe industry or the Chinese whatever industries they feel like? Hopes of progress at the next round of the world trade talks would fade and we would be in danger of heading into a new era of protectionism. Free markets and globalisation may not be the most fashionable ideas at the moment, but we should think long and hard before giving them up in order to support a few firms trying to flog badly designed products that are out of step with what their consumers want. As Zammett himself might say, "may the best brand win".
Richard Cree