Yahoo Finance 'Dismal' UK car production drops to 65-year low
Car production fell to the lowest level since 1956 last year as the computer chip shortage and the closure of Honda’s Swindon factory took their toll.
Britain made 859,575 vehicles, or 61,353 fewer than even pandemic-affected 2020, in what the Society of Motor Manufacturers and Traders called a “dismal” year.
Most of the 6.7pc decline was blamed on the shortage of computer chips, but about a quarter was due to the closure of the Honda plant that made the Civic. The Japanese company had been the UK’s fifth-biggest car maker before the closure.
With Jaguar planning to end mass production at its Castle Bromwich plant and Vauxhall opting to make vans rather than Astra cars at Ellesmere Port, there are concerns about the ability of UK car makers to reclaim lost ground.
British car production peaked in 1972, when 1.9m cars rolled off production lines. The record in the past decade came in 2016 when 1.7m cars were made, with numbers declining ever since.
An independent analysis by consultancy Auto Analysis suggests the UK will make more than 1m cars next year and 1.1m in 2025. However, Mikes Hawes, SMMT chief executive, said returning to pre-pandemic levels would probably require attracting a new manufacturer to replace Honda.
Between 1,500 and 3,000 computer chips are used in an average car, controlling dashboard displays, electric windows, lights and windscreen wipers as well as the onboard computers that control navigation and audio systems.
Supplies have been limited in the aftermath of computer chip factory shutdowns earlier in the pandemic, which pushed up prices. Upmarket carmakers such as Bentley and Rolls-Royce were less affected as their owners, Volkswagen and BMW, prioritised them for chips and they could afford to pay more for them because of their cars’ larger margins.
Earlier last year, the industry had expected to beat 2020’s output as coronavirus-related factory shutdowns ended, but the computer chip shortage persisted longer than expected.
Mr Hawes said: “The impact of semiconductors really hit hard in the last quarter.”
Semiconductor shortages will would ease in the second half of the year, but “ripples” will linger into in 2023, he added.
While car production suffered, van production rebounded as shifting shopping habits meant demand soared.
Commercial vehicle production jumped just over a fith last year and is now only 3pc below pre-pandemic levels, Mr Hawes said.
Another reason for cautious optimism is the recovering levels of investment in the UK car industry, according to the SMMT chief.
Car makers invested £4.9bn last year, including a proposed £2.5bn battery gigafactory in the West Midlands, a new battery plant planned by Nissan, and upgrades to sites owned by Vauxhall, Aston Martin and Ford.
In 2018, car makers spooked by the prospect of new border rules reduced investment to less than £600m, and it has been recovering since.
The UK will need about 60 gigawatts of electric vehicle battery production capacity. Proposed gigafactories including the West Midlands project and one being built by BritishVolt could produce up to two thirds of the batteries the UK needs, the trade body estimated.
Britain exports about four-fifths of the cars made here, and forthcoming rules could mean the UK will need to make batteries locally rather than importing them or face strict tariffs and crippling costs.
Underinvestment in the wake of Brexit means the UK is playing “catch-back” when it comes to battery making, Mr Hawes said.
Car makers face challenges in surging electricity prices and the enduring administrative costs of the UK’s new relationship with the EU.
“It was incredibly tough and it remains tough but there is optimism that in 2022 things will improve,” said Mr Hawes.
