Why too much car-making capacity may be good news for the buyer
Published 25/06/2014 | 02:30
IT is hidden from the view of European and Irish car buyers but the effects are being felt by consumers every day. The fact is that car plant capacity across the continent will run at about 70pc this year. That is well down from the halcyon days of 2007, when it was at about 85pc – a level not expected to return until 2020, if ever.
Basically, much of the car production system is running at a loss and this affects the price you pay for your car and often the level of standard specification.
Some carmakers are hindered from introducing wide-ranging efficiencies because of political issues (none greater than state ownership) when it comes to job losses or factory closures.
There are several more car plants at risk of closure, including a PSA (Peugeot Citroen) one in France and a Honda factory in Turkey.
Others like Ford will keep production of their biggest European selling model, the Fiesta, in production in Germany after targeted cost-savings.
Naturally, you expect efficient producers to be in a position to sell more competitively, so the consumer gets a better deal than from those suffering over capacity and losses.
A carmaker that has tackled their production failings with greater efficiency may have decided to feed their medium and long-term plans with their savings.
They may increase investment in research and development to drive home their advantage over those other less efficient carmakers.
So the car buyer may or may not see any price-tag savings or better standard specification from the stars of car production.
On the other hand, despite what logic might teach us, because most of the less efficient car plants have major over-capacity issues, and these cars have to be stored or sold, the first option isn't a runner, so deals are to be had for buyers instead.