The UK automotive industry now stands at a perilous low ebb. During the first six months of the year, production of cars has fallen by 7.3%, according to the Society of Motor Manufacturers and Traders (SMMT). UK car and van manufacturing has presumably fallen to its lowest level since 1953. This period of decline excludes the extraordinary Covid-19 pandemic-related industry shutdown. This unfortunate downturn has been exacerbated by a number of factors. Production declines on vans and uncertainty surrounding tariffs in their largest market, the EU, are notable factors.
With van production in the UK down by an alarming 45% during the first half of the year, this sudden drop was largely the result of Vauxhall’s Luton van plant shutting down. With the exodus away from the industry, these closures have further stressed the industry. Consequently, manufacturers are facing a perfect storm of rapid and unforeseen market changes. As a result, some firms decided to either slow down production or cancel it altogether. They achieved this success whilst trying to navigate the added difficulties of tariff uncertainty, particularly around trade with the US – the UK’s second largest export market.
Mike Hawes, chief executive of SMMT described the production figures as “depressing,” an apt description considering the dark clouds surrounding the sector. It is to be hoped that the first half of the year was indeed the nadir for the UK auto industry. Now, it is looking to bounce back.
“We want the discounts to become available to drivers as soon as possible, and we are engaging extensively with vehicle manufacturers and have published guidance to help them apply as easily as possible.” – A transport department spokesperson
In order to get the economy moving, the national UK government is bringing back local authority grants. These grants will provide up to £3,750 for EVs priced £37,000 or less. Under this £650 million programme, funding will be allocated on a first-come first-serviced basis. It intends to provide manufacturers with a significant boost, all the while saving consumers cash. As we have previously written, these grants will likely be off-limits to many Chinese and Korean vehicles that aren’t produced under certain conditions.
The tide of new electrified vehicle production slightly rose over the incredible challenges. It increased by 1.8% during the first six months of this year. Battery electric, hybrid electric, and plug-in hybrid electric vehicles made up a new all-time high greater than two out of every five vehicles manufactured. There is still a lingering question with regard to which specific models will be eligible for the new, smaller spigot of grants.
“The difficulty is, we don’t know. Nobody knows, but nobody, not even government, really knows yet, which models and which brands will qualify.” – Mike Hawes, SMMT chief executive
Until June 30, a new trade agreement with the US cut tariffs on cars from 27.5% to 10%. This new change would go a long way towards revving up exports and pumping up production numbers. As you’ll hear, the UK automotive sector is making some big moves towards an exciting future. By 2035, they plan to increase production to 1.3 million vehicles annually, yet face enormous obstacles to bring this vision to fruition.