Politics accelerates decline of car industry

The global auto industry is stalling. Falling demand, particularly in the all-important Chinese market is causing a slump in sales.

The VW emissions scandal has emboldened regulators to enforce far tougher standards on car producers, and in some instances introduce city bans on diesels. This in turn is forcing car companies to ramp up the development and delivery of new electric models.

All the while, a new generation of urban buyers are being lured towards car-sharing schemes and a shift away from ownership. It’s hardly surprising then, that the share prices of many auto giants are down over 20 per cent so far this year, in a market that is otherwise flat.

For all the seismic shifts in the sector, it is the politicians who seem to be most determinedly steering the car giants towards the kerb.

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Political sidewinds are battering the already unstable industry

Two major announcements on Thursday had evident political fingerprints, despite denials. Ford's decision to shut its engine plant at Bridgend in south Wales was a consequence of several factors, but claims that it has nothing to do with Brexit are a little hard to take.

Uncertainty over Britain’s plans to leave the EU has clearly fed into the company’s calculations. Earlier this year Ford warned that a so-called no-deal exit would have “catastrophic” implications for its operations in the country.

On the continent, the proposed €33 billion merger of Fiat Chrysler and Renault came unstuck because of French government concerns over safeguarding jobs in France. The government is Renault's largest shareholder. It's likely that officials in France were also concerned about having to fend off pressure from the Italian government if the time came to make cuts at plants there.

At the same time European and US auto groups are regularly forced to adjust their business plans to fit the mood music emanating from the Trumpian White House.

These political sidewinds are battering the already unstable industry. The auto giants have plans in train for the big tech and social shifts, often taking shelter in partnerships and consolidation: it's the political intrigue that's likely to cause them to crash. And if there is one lesson we can learn from the UK auto industry, it's that politicians should not be let near the wheel. If in doubt, consider the sorry tale of British Leyland.