Manganese Bronze, which makes London's black cabs, has warned that vehicle sales have fallen by more than a third amid the global financial crisis.

Taxi sales fell 37.5 per cent to 1,628 in the nine months to September 30, down from a near record of 2,604 last year, following the launch of its TX4 model.

The group gave warning that the UK market place remains challenging because of the economic uncertainty and it does not expect UK sales to exceed the manufacturing break-even point in 2008.

The company now needs to sell 2,000 vehicles a year to break even — a 15 per cent reduction.

Manganese believes demand for new vehicles in the second half of the year will follow the normal seasonal pattern and be below that of the first half, although it said that with UK business conditions continuing to be uncertain, forecasting the level of demand for new vehicles was more challenging.

The company’s earnings are under pressure from the strength of the euro increasing the cost of engines purchased from Italy, the costs of supporting its joint venture set up with engineers, and the cost of the international sales and marketing team.

The group has reduced the number of taxis it makes to reduce inventory levels and has cut jobs in response to the lower sales and higher costs. Manganese has also recently been hit by several under-bonnet fires in early production models of its TX4 taxi, which has forced the group to recall all the vehicles and conduct an investigation.

The company has repaired 400 cabs, while a further 600 are off the road awaiting work and an additional 4,400 working cabs expected to be inspected before the end of February.

It expects the cost of the recall to be about £4 million and is in talks with insurers and suppliers to establish legal liability, which could lead to the company recovering costs or having to pay compensation to drivers.

In China, where the group believes its Shanghai LTI joint venture gives it the greatest potential to secure its long-term future, the group said it expected significant profit contributions from mid-2009.

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