CEO Update

2021 must be a year of recovery

29 January 2021 #CEO Update

Without doubt, 2020 was a year like no other and the most challenging for UK automotive in living memory. The pandemic devastated UK automotive production, with Covid lockdowns depressing demand, shuttering plants and threatening lives and livelihoods.

Over the course of the year car manufacturing output fell -29.3% to 920,928 units – the worst performance since 1984 – with domestic production dropping by more than -30.0%. Even amid the global pandemic our exports drove UK manufacturing, with more than eight in 10 cars built shipped overseas.

CV production also declined by -15.5% to 66,116 units with output for overseas markets down -17.8% The manufacturing of engines decreased too, by -27.0%, but we still made some 1.8 million internal combustion engines. As with cars, most CVs and engines were shipped abroad, reinforcing the importance of free and fair trade with all our global markets.

The EU, however, remains our most important export destination, with 53.5% of all UK car exports heading there last year, followed by the US with 17.7% share and then China with 7.6%.

The US market provides a development opportunity for our automotive businesses and on Thursday 4 February we will take a look at what to expect from the US in the year ahead, and how the Biden administration may impact US automotive. I encourage you to sign up for the webinar here.

Despite this devastating decline in automotive manufacturing output in 2020 we can be cautiously optimistic about 2021. The rollout of a vaccine is gaining momentum and the Brexit uncertainty faced over the last four years has been removed.

New challenges – including additional customs burdens and the need to regain our global competitiveness while driving towards net-zero – will be major issues in 2021, yet the character of the sector is one of dogged determination and resilience, capable of adapting and being creative in order to succeed.

The latest independent production outlook forecasts UK car output to recover in 2021 to more than one million units, but this depends on Covid recovery, market confidence and dealing with new cross-channel rules. SMMT will continue to work with government on these challenges and on attracting much needed investment and supply chain transformation as the industry transitions to smart and sustainable mobility.

Indeed, 2021 has already seen positive investment in UK automotive. Following last week’s announcement regarding additional battery production in the North East, there is more good news with the announcement that £100m of fresh investment into Lotus to build a new prototype model and, importantly, creating 250 jobs in the process.

A recovery in 2021 won’t be simple, but with more investment of this nature and a competitive business environment if anyone can succeed in doing so, the automotive industry has proven time and time again that it can.

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