The motoring world is in the midst of a revolution. All motorists are well aware that the cost of fuel seems to be ever increasing, while Moneysupermarket.com recently revealed that the cost of car insurance has risen by 40% in the past year for the average driver. To top all of this off, VAThas risen to 20% which will ultimately place a further strain on UK motorists. So how are the car manufacturers responding to these changes and who is benefitting the most?
Vauxhall has been the first manufacturer to announce that it will reduce prices this year by up to 20% in an attempt to offset the effects of the VAT rise. Initially this discounted rate will only last for the first five weeks of 2011 but it is expected that the initiative will be increased for a longer period of time. It is expected that other car manufacturers will now emulate Vauxhall’s strategy.
However, Indian car manufacturer Tata has opted for a slightly longer term strategy by producing the world’s cheapest car called the Tata Nano, which costs just £1,500. However, this discounted rate does come at a "price" as the car is limited to a top speed of 65mph and doesn’t even have a radio or power steering. This therefore begs the question whether a nine year old Ford Fiesta would be a better option for motorists than a brand new Tata Nano.
Toyota sparked the green car revolution in 1996 with the introduction of the hybrid Prius model. The concept has subsequently been picked up by a number of other manufacturers, with Honda and Volkswagen in particular benefitting from having a hybrid vehicle currently in their range.
However, it is generally believed that fossil fuels will eventually run out and that alternatives must be found. One possible alternatives is electric motoring which are starting to become a source of increasing interest for car manufacturers. Initial models such as the G-Whiz came without mass manufacturing backing, but Nissan, Renault, Peugeot and Mitsubishi have all announced plans to introduce completely electric vehicles in the next couple of years. The first of these will be the Nissan Leaf, which is capable of a top speed of 92mph and has a range between charges of 100 miles.
However, adoption of the Leaf is likely to be compromised by the lack of recharging infrastructure in the UK, with electric car charging points not a common sight. The government has announced plans to rectify this issue, and has set aside a budget to ensure that the country has a sufficient infrastructure in order to make electric car ownership a much more realistic option by 2012.
Another problem currently limiting the appeal of electric cars is the cost. As with any innovative technology, the initial price of purchase reflects the research and developments costs. This means that Nissan has priced the Leaf at £28,350. The government is offering a grant of £5,000 to anyone who is planning on buying an electric car, but it still means that the Leaf is £9,000 more expensive than the more practical Ford Focus. Fuel and tax savings would reduce the Leaf owners annual bill by up to £3,000 per year, but it would still take three years to recover the costs, if cost alone were the only imperitive.
The current market
The UK car market has already seen some significant changes recently with newspapers reporting that Volkswagen has overtaken Ford as the UK’s most popular car manufacturer after the latters 33 years in first position. However, it should be noted that these statistics are based on the fact that Volkswagen also owns the Audi, Seat, Skoka, Bentley and Lamborghini brands. A more realistic statistic is that it has also been reported that the Ford Fiesta has now overtaken the Ford Focus as the most popular model in the UK, perhaps reflecting the fact that consumers are now opting for smaller cars as a reaction to increased motoring costs.
The car market is about to change for ever. The country currently isn’t quite ready for electric vehicles. However, their time will come and like Toyota with its hybrids 15 years ago, Nissan’s early entry into the market could help it maintain market share as more people become interested in electric car ownership, leading to Nissan becoming one of the leaders of the car market within the next five years.
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