Lack of demand forces drop in auto output

Posted on 24 Apr 2009 by The Manufacturer

UK car production halved in March as automotive sector continues to struggle.

The Society for Motor Manufacturers and Traders (SMMT) has revealed 69,903 vehicles came off UK car production lines in March – a 52.1% drop on the figures for this time last year. That meant car production for the first quarter of 2009 was down 57.4% in total with the total figure reported as 205,305.

Commercial vehicles have suffered the biggest decline in production, falling 57.1% in March and 63% for the year so far.

“Efforts to restore confidence and improve access to finance, particularly for companies in the supply chain, are key to sustaining our industrial capability,” said SMMT chief executive Paul Everitt. “The motor industry has an essential role in the UK’s economic future, but it will be some months before we see any significant increase in output.”

He described government’s scrappage initiative, whereby people buying a new car can get a £2000 discount if they send one over 10 years old to the junk yard, as “an important first step.”

Calum MacRae, car industry expert at PricewaterhouseCoopers, commented on the fall:

“The SMMT’s announced 56% decline in car production for March was in line with our expectations and consistent with a full year forecast of 1.1m units of output for the UK in 2009 (-28% on 2008). Honda’s plant is still shut down and that built 21,000 units in March 2008 and with other UK manufacturers cutting back on production and destocking, the figures are not surprising.

“The scrappage scheme could boost factories in the UK building small cars such as Nissan at Sunderland and Mini at Oxford, while scrappage could see Honda bring forward its small car production plan (Jazz at Swindon) from later this year to take advantage of the scheme,” added MacRae. “All told, the 1.1m forecast for 2009 should be achievable once inventories are run down and underlying demand picks up. ”

Exports make up roughly four out of five vehicle sales in the UK so far this year.

Operational Excellence graph

Graphic: SMMT