CEO Update

Supply constraints hit home in March

08 April 2022 #CEO Update

While the automotive industry has proved resilient over the past two years, the long-term effects of the pandemic continue to stifle any recovery for the sector. Despite demand for new vehicles remaining high, the global shortage of semiconductors contributed to a -14.3% decline in car registrations during the traditionally strong ‘new numberplate’ March. Indeed, this year’s March performance was the worst since we went to two annual number plate changes in 1999, with the market around half what it should be. It was a similar story for commercial vehicle (CV) registrations, which fell by -27.6% to 40,613 units.

Amid these difficulties, manufacturers, are doing their upmost to deliver the latest, and lowest emission vehicles to customers, with the sale of battery electric vehicles (BEVs) growing 78.7% to just shy of 40,000 units, the best month on record. Notably, more BEVs were registered in the month than in the entirety of 2019. When combined with plug-in hybrids and hybrids, electrified vehicles comprised more than a third of all new registrations.

Yet this is a difficult time for consumers and businesses alike with increasing household costs and overheads. Government must do all it can to support both groups so that the growth of electric vehicles can be sustained, and the UK’s ambitious net zero timetable delivered.

Yesterday the government released its ambitious Zero Emission Vehicle (ZEV) Mandate proposals which will be the toughest amongst any major western market. Any mandate must be pragmatic, flexible and reflective of every manufacturer’s long-term commitment as well as avoiding complexities and perspectives that could stifle the market and UK manufacturing investment.

Regulation, however, must encourage consumers to purchase not just compel manufacturers to produce. Market transformation is proven to work fastest when mandates are matched with incentives and, for automotive electrification, regulation should be linked to commensurate and binding targets for infrastructure provision.

This will enable consumers to have the confidence to purchase these new vehicles as opposed to retaining their older petrol and diesel cars  for even longer thereby undermining the carbon savings this regulation seeks to deliver.

The industry is committed to decarbonising, welcomed the Government’s Ten Point Plan and is up for the challenge of Net Zero. We will now work closely with government during its consultation process to ensure that the final regulation helps the market transition to zero emission motoring.

Electrification will be high on the agenda at SMMT’s Regional Forum North East – a region with a rich automotive heritage – taking place at the Stadium of Light, Sunderland on 5 May.

For those looking to network with key contacts within the UK automotive industry in the North East and explore new business opportunities, this is a must-attend event. For more information and to sign up, click here.

Update will be taking a brief pause next week, returning on 22 April so, for now, on behalf of everyone at SMMT, I hope you enjoy the forthcoming Easter break.