UK car production output lowest since 2010

30 January 2020 - autocar

UK car production output lowest since 2010

Latest SMMT figures show that output in 2019 dropped for the third year running

Car production in the UK dropped for the third straight year in 2019 to fall to the lowest output since 2010, according to newly released figures from the Society of Motor Manufacturers and Traders (SMMT).

The 1.3 million production figure was a 14.2% drop on 2018 and more than 400,000 units down on the highest figure in modern times of 1.72m units in 2016. SMMT boss Mike Hawes said that the latest fall was down to weakened business and consumer confidence in the UK, the continued drop in demand for diesel models across Europe, of which the UK is a large producer, and a drop in demand in key export markets including China, Japan and the US.

Now the prospect of remaining within a customs union with the EU has been removed, Hawes has also called on the government to ensure a free trade agreement with the European Union that includes tariff-free and quota-free trade between the UK and EU for the automotive industry in a trading deal that the government has said it will negotiate before the UK/EU's post-Brexit transition deal on current terms expires at the end of 2020.

That's significant as 81% of all cars built in the UK last year were exported - with the EU taking almost 55% of that figure at 576,000 units. Hawes says there is a desire from automotive industries on both sides of the channel to strike such a deal, given that the UK imported more than 1.6m vehicles from the EU in 2019, some seven out of 10 of all cars sold here. "We are still very dependent on the EU for exports and imports," said Hawes.

Striking such a deal will not only preserve that trade, believes Hawes, but also free up an expected bottleneck of decisions from car manufacturers to invest in UK production sites due to uncertainty around the UK/EU future trading deal, most notably with PSA's delayed decision on whether or not Vauxhall's Ellesmere Port factory will build the next-generation Astra. It's delays on decisions like this that Hawes believes shows that the UK car industry is not in cyclical decline, with car makers believing they can grow businesses here with the right conditions.

Hawes has made clear to the government, including business secretary Andrea Leasdom, the SMMT's position on what a future trade deal should look like, and while he doesn't know whether the government would extend the current transition phase beyond the current 31 December deadline, he does expect the UK's position on what that trade deal should look like to become clear in the space of a few months to allow the delayed investment decisions to be made.

Should the UK diverge from the EU regulations in the automotive industry, there have already been warnings from the likes of Volvo boss Hakan Samuelsson that the range of models offered would be reduced to UK buyers due to the increased costs and complexities of meeting regulations for an additional market. Some 400 models are offered for UK buyers, so each would need to be developed to meet UK regulations with associated costs.

Fresh investment into the UK car industry stood at £1.1 billion in 2020, most of which came from Jaguar Land Rover's announcement it would build electric cars including the next Jaguar XJ in the UK. That figure is 60% lower than the rolling seven-year average of £2.75bn into the UK industry, which has benefitted from many of its highest-volume models having been committed to being produced in the UK before the Brexit decision. While production in the UK should stay largely stable to the short-medium term, it's investments in replacement for these cars and additional models that has not been forthcoming.

There was better news in 2019 for the UK's smaller, specialist car makers, including the likes of Bentley and Rolls-Royce, whose combined production rose 16.2% to just over 30,000 units. Alternatively fuelled vehicle production, including hybrids, plug-in hybrids and electric cars, also increased by more than a third, to total just under 200,000 of all vehicles produced.

The SMMT projects that there will be a further fall in UK car production in 2020, dropping to 1.27m units, despite there being an expected positive impact from the likes of the Sunderland-built all-new Nissan Juke and the first full-year production of the Toyota Corolla in Derbyshire.

An all-new Nissan Qashqai, Britain's most exported new car, will have its first full year in production in 2021, which should help compensate for some of the lost production when Honda's Swindon plant closes at the same time.

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