10:18 am, April 28, 2022
UK car production fell by more than 30 per cent in the first quarter of the year, with the war in Ukraine having a huge knock-on effect on supply, the SMMT has said.
Data released today by the trade body found that UK car production fell by a whopping 32.4 per cent in Q1, a year-on-year decline of 99,211
Overall a total of 207,347 new cars were built during the first quarter, down from 306,558 in pandemic-affected Q1 2021.
Output in the last month of the quarter fell by more than a third and was down by 33.4 per cent year-on-year, on 76,900 units.
That is a fall of close to 40,000 cars when compared to the 115,498 units produced in the same month last year.
The decline, resulting in the weakest March since 1998, was driven primarily by a decrease in production for overseas markets, which fell by 41.4 per cent.
Exports to the US saw the greatest decrease during March, dropping by 63.8 per cent year-on-year, largely due to the closure of a major plant in Swindon in July 2021 which manufactured for the US market, while exports to the EU declined by 24.5 per cent.
Despite the struggles, seven in 10 cars (72.5 per cent) made in the UK last month were built for export, with the EU taking the majority (67.0 per cent), followed by the US (8.2 per cent) and China (6.6 per cent).
Production for the domestic market, meanwhile, increased modestly by 4.3 per cent, equivalent to 864 additional cars.
Over the course of the first quarter, outputs for both export and the UK domestic markets fell by 35 and 20.3 per cent respectively.
The SMMT has said the ongoing global semiconductor shortage, the Ukraine crisis exacerbating parts supply challenges and manufacturers facing an increasingly challenging economic environment with rising energy costs are among the biggest causes of the slump.
Mike Hawes, chief executive of the SMMT, said: ‘Two years after the start of the pandemic, automotive production is still suffering badly, with nearly 100,000 units lost in the first quarter.
‘Recovery has not yet begun and, with a backdrop of an increasingly difficult economic environment, including escalating energy costs, urgent action is needed to protect the competitiveness of UK manufacturing.
‘We want the UK to be at the forefront of the transition to electrified vehicles, not just as a market but as a manufacturer so action is urgently needed if we are to safeguard jobs and livelihoods.’
‘Short-term outlook is bleak’
Reacting to the news, experts said the new painted a bleak picture for the short-term outlook of the market.
Jim Holder, editorial director, What Car?, said: ‘The automotive industry continues to be battered by the chip supply crisis and war in Ukraine at exactly the moment it needs to be investing huge sums to develop, build and sell new electric vehicles.
‘With a financial crisis looming too – and the memories of especially hard times for car sales in previous recessions casting a massive shadow – the short-term outlook is bleak despite reports of strong profits during this likely relatively brief period where demand outstrips supply.
‘The good news is that the industry is transitioning, investing billions to fit out factories for electric vehicle manufacturing, including in recent months Stellantis’s Ellesmere Port and Nissan’s Sunderland facilities.
‘But there is no question that the investment needs to be bigger still and arrive quickly if the UK Government’s ambitious targets for zero emission manufacturing and sales are to have any chance to succeed.’
A byproduct of the semiconductor shortage has been an increased focus on more profitable, high-end models.
The policy has seen several carmakers report record profits but financial experts fear it may not last.
Chris Knight, automotive partner at accounting firm KMPG, said: ‘Component and material availability challenges remain, with the problems caused by the pandemic now added to by the conflict in Ukraine.
‘Car production volumes remain below pre-pandemic levels, but manufacturers have adapted, profiting from focus on a buoyant electric vehicle market, and prioritising components into higher-margin cars generally. Inflation driving up production costs further compounds this approach.
‘Once the market eventually moves beyond these constraints and stabilises, a continued focus on such high margin production will likely be at conflict with maintaining market share – particularly with increased, and lower-cost, competition emerging.’
