CEO Update

A tough year for UK automotive but record EV production gives cause for optimism

27 January 2023 #CEO Update

2021 was challenging enough, but the latest UK automotive production figures out this week lay bare just how difficult was 2022. Car manufacturing fell by -9.8% to 775,014 units due to persistent supply chain issues – most notably semiconductor shortages, the effects of lockdowns in China, and the significant structural changes that have taken place in the UK with the closure of one of our larger car production plants. Political instability at home, war in Europe, inflation and spiralling energy costs all added to the immense difficulties.

But despite all that, there have been some positives. UK factories turned out a record number of electrified vehicles – with combined volumes representing almost a third of all car production. 234,066 battery electric (BEV), plug-in hybrid (PHEV) and hybrid (HEV) electric vehicles were made in Britain with combined volumes up 4.5% year-on-year.

These are valuable products, not just to the sector but to UK trade and GDP. Since 2017 the value of our BEV, PHEV and HEV exports has risen seven-fold, from £1.3 billion to more than £10 billion. These vehicles now represent 44.7% of the value of all UK car exports, up from a mere 4.1%. It is apparent now more than ever, that we need to make more of these vehicles as they are crucial to our future prospects, not to mention the wider UK economy and net-zero.

There was further good news in terms of commercial vehicle production which delivered its best year in a decade as manufacturing output rose by 39.3% to 101,600 units and we expect further growth this year as Ellesmere Port comes back on line. In addition, the total output of the UK’s specialist, performance and luxury brands was up 6.6% to 32,575 units, worth a total of £3.7 billion. These are world famous brands synonymous with Britain and they play an important role in the development of advanced automotive technologies such as light-weighting and efficiency which, in turn, help advance the wider industry.

The latest independent production outlook offers some optimism too for the year ahead, with semiconductor chip shortages beginning to ease. It forecasts car and light van output to rise by 15% – an uplift worth some £3.9 billion. By 2025, light vehicle production volumes are projected to surpass a million vehicles, benefitting manufacturers and the wider sector, and also the communities and societies they support, and the nation’s ambitions around net zero and a more global Britain.

To realise this growth, however, we need a vision and a framework for investment. Government will play a key role here. A clear plan must be forged, one that addresses our competitive weaknesses – soaring energy costs that threaten viability, labour shortages and an essential skills transition and the paucity of a fiscal framework and narrative that compares unfavourably with other investment locations.

We are seeing growing protectionism around the world. Major trading partners are considering policies that could hoover up finite investment in green technologies including batteries. The UK has eminent strengths in advanced manufacturing including automotive and we must build on those foundations. With the right framework, Britain can continue to be a world leader in producing the sustainable, smart vehicles on which our reputation has for so long been built.

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