Hyundai UK Chief: Interest Rate Hike Will Hurt Finance-Reliant Car Industry

Higher interest rates in the UK will hurt the country's success story car industry because its sales rely heavily on finance packages for consumers, according to the boss of Hyundai UK.

The Bank of England is expected to start raising its benchmark rate up from its record-low of 0.5% during 2015, ending the era of ultra-cheap credit as the economic recovery strengthens.

But the central bank has indicated it will only lift its base rate gradually to fend off any shocks to the economy.

Many consumers rely on long-term finance to pay for vehicles, the cost of which would rise alongside higher interest rates and so may deter some from buying a new car.

"Let's say 0.25% may not have significant impact," Tony Whitehorn, chief executive of Hyundai UK, told Reuters.

"But if that was followed in two months' time by another 0.25% and in two months' time by a further 0.25%, that then becomes quite significant.

"I think it just has significant ramifications to confidence and directly into accessibility of funds to buy cars."

After suffering a painful decline, the UK car industry has rebounded in recent years.

According to automotive industry organisation SMMT, 2.6 million new vehicles were registered in 2013 in the UK. And the country's automotive manufacturing boasts a £60bn annual turnover.

In April 2014, the industry saw a 26<sup>th consecutive month of growth in new car sales after an 8.2% rise over the year to 176,820 units.