Not surprisingly, the difficulties of British manufactures were exploited by the American producers, who accounted almost entirely for the flood of imports which increased from 5,000 cars in 1919 to 29,000 in 1920. This was despite the 33.1/3 per cent import duty, and reflects not only the inability of British manufactures to supply the demand but also the improvement in the price of American cars relative to their British competitors, as costs soared in the face of rapidly rising demand. Within eight months of the cessation of hostilities the new 20 h.p. Austin motor car, with a centrally controlled gearbox to facilitate entry and a streamlined body and integral boot, began to leave the factory. The chassis was available with three bodies: open touter, coupe, and landaulette, and rose within months from an initial price of £395 to £550 in 1920, the cheapest complete car rising to £695. The price which purchasers were prepared to pay was relative to the type of vehicles available, and for those wishing to possess a high-powered car with a shorter delivery date the Americans were supplying, and customers were buying, the 21.9 h.p. Chevrolet at £450 and the 18 h.p. Overland at £495. It is not surprising that sales of the Austin Twenty remained disappointing, particularly when the extraordinary boom conditions of 1919 began to peter out the following year.
In September 1920 Sir Herbert denied publicly that the motor industry faced a 'dark outlook, maintaining that the drop in sales was limited to highly priced cars, and that despite the temporary recession a car moderately priced to maintain and run was better able to hold its own. For Austin, however, this was a serious problem, the post-war strategy having concentrated on the production of a single, relatively highly priced, 20 h.p. model, of which by July 1920, 3,000 had been delivered to customers. The Twenty not only put Austin in direct competition with American cars but found difficulty in selling in a market which even then was beginning to turn away from high-powered vehicle. For when the hectic buyers' market of 1919 collapsed under the weight of rising prices, its character also began to alter in such a way as to favour the lower horsepower market. It was at the nadir of the post-war depression in 1921 that the Oxford's price was cut dramatically from £590 to £415. The two-seater Cowley fell from £465 to £299. Meanwhile, the loss of Austin's sales momentum adversely affected the Company's cash flow and forced Sir Herbert to the banks and to the public.
The speculative activities, which were responsible for many of the extremes characteristic of the new issue boom immediately after, the war, reduced the chances of even the most solidly based firms in need of assistance receiving sympathetic treatment from the financial institutions to which they turned. Like so many other companies, Austin had suffered from the simultaneous unprecedented rush to the City, followed by a corresponding failure to obtain finance adequate to cope successfully with the various post-war strains of material shortages, of strikes, of re-entry into overseas markets now dominated by American cars.
Recognizing the urgency of establishing large-scale production if a substantially higher share of the market was to be secured compared with pre-war, Sir Herbert tried to solve the capital shortage by a public issue in 1919, when the Beecham Trust, Myers & Co., and Bentleys of Huddersfield were eventually persuaded to underwrite 6 per cent preference shares to the value of £1 million in the Austin Motor Company. The Midland Bank, to whom the Company was heavily indebted, had agreed to appear on the prospectus as principal bankers only after Sir Herbert agreed to some 'rearrangements for the management of the company'. This involved the substitune of Sidney Van dem Burgh and Harold Anderson for two retiring directors, one of whom was Colonel Frank Kayser. The Midland Bank was asked for assistance also in purchasing the North and West Works by accepting a mortgage in return for cash and providing all advance of up to, £500,000 on current account. The Midland Manager advised against creating any form of debentures, which he thought would be unfair to preference holders taking up the new issue and would also damage the Company's credit standing. It was for this reason that the Bank urged Austin to avoid a debenture issue in reaching a settlement with the Government on the North and West Works. But Austin appears to have had little alternative, and the Company and the Treasury duly reached a provisional agreement involving a mortgage of the works as security, with payments by annual instalments beginning in December 1921. To the mortgage value of £24,000 (the boom price of the North and West Works) was added the