It is pretty clear that I’m not an economist, as I have a very simplistic view on how the British economy should be working and there are no doubt hundreds of reasons why I’m wrong.
We are told that we are in recession, or negative growth for those MPs that like to talk in utterly preposterous ways, before being told the economy is growing once more by figures so small that any two year old could work out the numbers. That cycle then repeated itself, all the time the powers that be talking of a weak or strong pound and chasing endless growth.
We’ve now not seen any significant growth in the UK for the last six years and I don’t think it has made a great deal of difference to anybody outside of the financial industry.
My income has been a little up and down over the last few years, but only by a small amount and nothing that leaves me too worried that I can’t pay the bills. I may not quite have the feel-good factor of a recurring annual increase in income, but I still go on holiday, I still buy shiny things for the house and I still spend a fortune on doing stupid things in cars.
It seems that buyers of cars in Britain are seeing things in a similar light. While the European market as a whole is back to where it was in 1993, here in the UK we’ve got manufacturer after manufacturer announcing record sales.
Kia’s sales in the first half of this year were 11% up on the same period last year. For SEAT, sales are up 18.6%, while Skoda’s are up 15.3%. It’s not just the budget end of the market though, as Mercedes sales are up 14.8%, BMW have seen a 6.0% rise and Jaguar are up a massive 21.8%. Even the supposedly struggling European mainstream players have seen increases, with Ford up 10.0%, Volkswagen up 5.7% and Peugeot recording an increase of 7.1%. Even Renault, who have been through some seriously tough times over the last few years saw a modest increase of 2.3%.
Of course, in an economy where there is next to no growth, for every increase in sales there has to be an equal and opposite decrease in sales elsewhere, something the likes of Lexus, SsangYong, Chevrolet and Alfa Romeo will be all too aware of.
Perhaps we’ve just reached the point where we can’t significantly grow any further, but is there anything wrong with that? Is there anything wrong with a steady level of sales across the board, with each car turning a profit that allows shareholders to be rewarded and investment made in to new models? Is it really necessary to chase endless and, in my view, unsustainable growth?
The fundamental laws of thermodynamics play a part in the economy, or at least they do to my feeble mind. When there’s no spare money left over, in all monetary exchanges where no money enters or leaves an isolated system, the entropy of that system increases. The remaining money is spread out and wasted. By chasing endless growth, entropy can only increase unless there is an injection of new money.
But there’s no new money kicking around. For the last six years there’s been no new money anywhere.
Is it now time for the car industry to reassess how they do business? In fact, that question could go out to pretty much any industry sector.
Rather than everybody trying to grow all the time, is there not a case to be made for knowing what part of the market you fill, turn that market in to a modestly profitable one, and then sit back and relax in the knowledge that you’re making some money and keeping a lot of people in work.
One car manufacturer has refused to chase ever expanding sales figures yet still remains strong and respected now; Morgan. Granted, they’re a niche player but Morgan still employ people who go out and spend that money in the wider economy, still turn a profit that is reinvested in the business to modernise and improve their product, and still have customers queuing up for their product.
To me, Morgan’s success suggests that the flat-line business plan could just work out.
In the meantime, the best we can do is to argue over every sticker price, look around for the very best contract hire deals, or stick it to the banks and simply save some money to buy or rent a car.
Fortunately there are some brilliant resources online to save you money (not least this very site) before we finally reach maximum entropy.
Of course, I’m sure there are plenty of reasons why I might be wrong which would explain why I play with cars rather than the economy, and I would absolutely welcome you telling me…
[button link=”http://www.contracthireandleasing.com/car-leasing-news/do-we-really-need-growth/” rel=”nofollow” color=”orange”]This article was first published at ContractHireAndLeasing.com on 15 July 2013.[/button]