Excess stocks build as car demand falls
Saturday, January 17, 2009
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A super pictorial from the Guardian highlights the growing problem of excess stocks of finished motor vehicles….
The newspapers are full of stories explaining how car manufacturers are taking steps to reduce production capacity and output. For example, the Honda factory in Swindon is now scheduled to close for four months between Feb and May. These steps help to reduce production output in the short-term. However, what about the output that has already completed its journey through the production line?
We know that demand for new cars has fallen sharply in the last few months - not just in the UK, but in almost every developed economy. The car dealers have only limited space in their showrooms. So there is only one thing left for manufacturers to do with finished vehicles. That is, park them somewhere where there is plenty of space, out in the open, and hope for an increase in demand. The car parks at ports, disused airfields and other open spaces are rapidly filling up with cars. A sad sight for some, although environmentalists might rejoice. But a great example of an industry that will struggle to shake off the problems of excess stocks for quite a while to come.
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