A report by Standards & Poor's, the credit rating agency, reveals that saturated demand for new cars and production overcapacity will see profitability levels stagnate. Margins will remain at between 1 to 3 per cent - equivalent to less than £340 profit per vehicle for most volume manufacturers - with no signs of improvement. The report said that the problem was compounded by the switch to greener motoring. More car buyers are opting for environmentally-friendly cars, which have slimmer margins for manufacturers.

Despite the warning, Standard & Poor's said it expected brands in the premium sector to be able to survive. The outlook for both BMW and DaimlerChrysler was rated as stable, despite the latter's problems with Chrysler. Fiat saw its rating upped to positive with the company experiencing improved trading margins supported by new model launches. The French carmakers received a less favourable outlook - S&P said it expected Peugeot and Renault to struggle to preserve market share. PSA had its rating downgraded to negative on a weak operating performance but Renault remained stable despite poor sales.