The automotive sector is yet to break free from the supply disruptions and semiconductor shortages caused by the pandemic back in 2020 but there are signs that the situation may be beginning to ease.
Results out this week show that car production fell in the first half of the year – down by almost a fifth to 403,131 units. But there is some optimism we may be turning the corner – albeit a long, sweeping bend – with output rising in May and June and commercial vehicle (CV) output is also proving its resilience, increasing 64.4% last month to round off its best first half in a decade.
The recent uptick cannot mitigate the dramatic falls seen earlier in the year which has led to the latest independent outlook now predicting that just 866,000 cars will be built this year in the UK, 1% more than last year, but significantly down against pre-pandemic levels.
Since then, we have seen the closure of a major car plant, and some significant model changes at others, which will impact the numbers but we have also, of course, seen the Russian invasion of Ukraine drive up energy and fuel prices as well as putting further pressure on some supply chains and raw material prices, all of which have contributed to the revised outlook.
Covid, the biggest issue facing global society, does appear to be being managed – it’s far from gone but it seems to be being handled in many countries, something we all hope will continue as we approach the winter. This, coupled with around £3.5 billion of investment that has been publicly announced in the first half, primarily for EV production and supply chains, is slowly helping increase confidence in the sector, albeit from a low base.
While this level of fresh investment is much larger than seen in recent years, it is worth noting that the transition to zero emission vehicle production is a once in 120-year event for the sector, meaning manufacturers are having to commit enormous sums to new technologies and products. The UK must seize the moment, ensure we are globally competitive and attract much more investment if we are to keep pace with global rivals.
With energy costs sky rocketing, coupled with non-competitive business rates and skills shortages, these are just some of the major issues that must be addressed if we are to build on our inherent strengths and grasp the opportunities presented by the dash for decarbonised mobility.
Finally, I am sure so many of you, like us at SMMT, were sad to learn of the death of Paddy Hopkirk last week. A motor racing icon but also a lifelong ambassador for the automotive industry, he was a much admired figure and, for those of us who were fortunate enough to work with him on occasion, just great fun. A long-standing member of SMMT committees, both he and his cars were regular visitors to our offices. He will be sadly missed and our thoughts are with his family.
