| Kippreport.com

Cars and the crisis

August 26, 2009 11:26 by Aarti Nagraj

Toyota has announced that it is planning to suspend the production of cars at one its units in Japan for more than a year, and cut its overall capacity by between 700,000 and one million vehicles a year, reports the BBC.  According to Reuters, the carmaker may also be considering halting production at one of its factories in the UK.

The financial crisis has drastically reduced vehicle demand across the world, and carmakers have been struggling with over production and decreasing sales. Toyota reported operating losses for the past three quarters of the year; in July, the company sold 135,535 vehicles excluding Lexus brand cars, down 3 percent from a year ago. Mazda’s sales during the month fell 13 percent to 16,686.

In the UK, the situation is improving slightly after the government introduced the cash-for-bangers scheme. According to the scheme, which came into effect in May this year, anyone trading in their old car for a new model gets a discount of £2,000 ($3,267).

According to the Society of Motor Manufacturers and Traders (SMMT) in the UK, car production in the country fell 17.9 percent to 107,635 vehicles in July this year compared with a year ago, the smallest decline in 10 months. New car registrations also increased by 2.4 percent in July compared to a year ago.

But reports say that the overall situation doesn’t seem too bright; car sales in the UK will fall by 10 percent next year from this year, from about 1.8 million to 1.63 million, says a forecast by consultants IHS Global Insight.

“The UK motor industry is starting to stabilize but remains fragile,” said Paul Everitt, CEO of the SMMT. “Industry needs government to deliver support through the Automotive Assistance Programme and encourage banks to provide access to much-needed finance and credit.”

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Tags: cars, demand, falling, Financial Crisis, GM, production, Russia, Toyota, UK