Industry in chaos as crunch bites

11th February 2009

It may sound barmy, but despite the recession and a massive dip in new car sales, makers are actually increasing their prices!

Ford has revealed a hike of up to six per cent with immediate effect, Vauxhall says it will add five per cent, while Audi’s range will rise by two per cent and Mercedes’ by 1.5 per cent. The move, blamed on the falling value of the pound against the Euro, will add £867 to the average Focus. Vauxhall’s shift will come into force across the range before the month is out, with the exception of the ageing Vectra and VXR8 muscle car. Audi’s increase is from 23 February, while Mercedes puts its prices up from April.

Volkswagen has confirmed “a small rise across the board in line with competitors”, probably this month. The message from Toyota is the same.

The Sterling/Euro exchange rate has a direct impact on costs if firms are manufacturing in the Euro zone. Components are paid for in that currency, as are other fixed costs such as worker salaries. As a result, any expenses which are expressed in pounds – such as new cars for sale here – aren’t worth as much as they once were.

But this might not be the end of the hikes. A spokesman for Ford said: “Additional rises are likely unless sterling strengthens in value against the Euro.”

With the exception of Russia, where prices have risen 4.5 per cent on average, no other European country will pay more for its new vehicles.