UK car production stalls as chip shortage continues to hamper sector’s recovery

Posted on 30 Sep 2021 by James Devonshire

UK car manufacturers made fewer vehicles for the second month in a row in August as the ongoing chip shortage continues to hamper production.

The number of cars made fell by 27% year-on-year, the second consecutive month of decline, to 37,246, according to the latest figures released today by the Society of Motor Manufacturers and Traders (SMMT).

As well as the global semiconductor shortage, the SMMT says the timing and length of some manufacturer’s summer factory shutdowns also contributed to the fall in output.

Car-manufacturing-summary-Aug-2021. the timing and length of some manufacturers’ summer factory shutdowns.

Image courtesy of SMMT

Despite the downturn, battery electric vehicle (BEV), plug-in hybrid (PHEV) and hybrid (HEV) car production continued to hold strong, surging to a new high in August. With 10,274 units produced, BEVs, PHEVs and HEVs represent more than a quarter (27.6%) of all cars made, a record high. UK car factories have now produced 137,031 alternatively fuelled cars since January — 51,679 more than the same period in 2020.

This reality bodes well for the government’s goal to ban the sale of new petrol and diesel cars by 2030. Hybrid car sales will follow suit in 2035.

But while overall manufacturing for the UK market increased by 3.3% in August, exports declined significantly, dropping by 32.5%. The SMMT says this decline was driven largely by falling exports to faraway markets, including Australia, the US and China, which were down 74.9%, 65.7% and 58.7% respectively. EU exports held up a little better, down just 4.9%, accounting for seven in 10 cars exported in August.

While year-to-date UK car production remains up by 13.8%, the performance needs to be put into context because of the enormous impact of the Covid pandemic in 2020. When compared to 2019 production levels, year-to-date figures are down 32%. Compare 2021 year-to-date performance against the five-year average for the first eight months of the year and it’s even bleaker,  down 42.8% — equivalent to 440,920 units.

Mike Hawes, SMMT Chief Executive, said: “Another significant decline for UK car production is extremely worrying both for the sector and its many thousands of workers nationwide. While not the only factor at play, the impact of the semiconductor shortage on manufacturing cannot be overstated. Carmakers and their suppliers are battling to keep production lines rolling with constraints expected to continue well into 2022 and possibly beyond.

“Job support schemes such as furlough have proven such a lifeline to automotive businesses yet its cessation today comes at the worst time, with the industry still facing Covid-related stoppages which are damaging the sector and threatening the supply chain in particular. Other countries have extended their support; we need the UK to do likewise.”

*Header image courtesy of Depositphotos