7:36 am, January 27, 2022

UK new car production in 2021 last year slumped to its lowest levels since 1956, new figures show.

Data from the Society of Motor Manufacturers and Traders (SMMT) showed output dropped by 6.7 per cent to 859,575 – over 61,000 less than 2020 and a fall of 34 per cent compared to 2019.

The SMMT said issues such as the shortage of semi-conductors, the closure of Honda’s Swindon factory, Covid-related issues like staff shortages and border controls following Brexit had all affected carmakers.

Factories had to reduce or pause production as they waited for parts hit by the global pandemic.

High energy costs are a growing problem for the industry, SMMT chief executive Mike Hawes warned.

He said there were grounds for optimism in 2022, with potential £4.9bn of investment announced, the highest since 2013, and annual production forecast to begin recovering to over one million.

The new data showed factories built a record number of battery electric (BEV), plug-in hybrid (PHEV) and hybrid electric vehicles (HEV) last year, with almost a quarter of a million of these zero and ultra-low emission vehicles leaving production lines, representing more than one in four of all cars made.

Four out of five new cars were shipped overseas, with the European Union being the biggest market at 55 per cent, followed by the United States.

The SMMT said a significant proportion of announced investments was in support of electrified vehicles, with the expansion of existing facilities in the north-east and the proposed development of a new battery gigafactory in the West Midlands.

Hawes said there was consumer demand for new cars, adding: ‘2021 was another incredibly difficult year for UK car manufacturing, one of the worst since the Second World War which lays bare the exposure of the sector to structural and, especially, Covid-related impacts.

‘Despite this miserable year, there is optimism. With Brexit uncertainty largely overcome, investments have been unleashed, most of which will help transform the sector to its zero-emission future.

‘This is a vote of global confidence in the UK but must be matched by a commitment to our long-term competitiveness, support for the supply chain in overcoming parts shortages, help with skills and training and, most urgently, measures to mitigate the escalating energy costs which are threatening viability.’

The SMMT added that the latest independent production outlook for 2022 forecasts UK car production to increase to more than one million units, representing a near 20 per cent increase on the 2021 total, and could reach 1.1m in 2025, with further growth beyond.

Richard Peberdy, UK head of automotive, at KPMG, said: ‘With supply shortages likely to continue into the second half of 2022, manufacturers are continuing to focus available components on higher margin models and markets.

‘This strategy is also helping to offset their rising cost of inflation, albeit the pressure to increase headline prices is building.

‘In normal times, an increasing cost of living would threaten consumer demand, but given demand for both new and used vehicles is still outpacing supply, consumer appetite remains relatively strong.’

Jim Holder, editorial director, What Car?, said: ‘For all the upbeat talk of the pandemic becoming endemic, it is clear that the automotive industry’s challenges are far from over – and they look set to persist for some time yet, potentially stalling any economic recovery.

‘The UK automotive industry plays a critical part in the nation’s finances, in a good year contributing an estimated £80bn in turnover and £15bn in value to the economy, accounting for 13% of all exported good by value and directly and indirectly employing around 750,000 people. If it thrives, the UK thrives – and vice versa.’