Monday 8th July 2019
UK car production declines for 12th month

The UK produced just 116,035 cars in May, another fall in production year on year which has now resulted in 12 months of decline.

Peter Campbell, Financial Times, reports:

British car production fell 15.5 per cent in May compared with the same time last year, a 12th straight month of declines, as the industry battles with falling exports and a slump at home.

Output dropped to 116,035 cars according to figures from the Society of Motor Manufacturers and Traders, with production down by a fifth since the start of the year.

While vehicle sales are declining in Europe as well as in the UK, British car manufacturing has also been hit by preparations for Brexit, with several major plants closing during April in expectation that the UK would leave the EU at the end of March.

A new Brexit date has been set for October 31, though it remains unclear whether the UK will secure a deal with the bloc or leave without an agreement, which will see tariffs and border checks imposed.

About 80 per cent of UK-made cars are exported, while more than half the parts used in making vehicles come from overseas.

Mike Hawes, chief executive of SMMT, the trade body, said: “Twelve consecutive months of decline for UK car manufacturing is a serious concern and underlines yet again the importance of securing a Brexit deal quickly.”

He added: “The ongoing political instability and uncertainty over our future overseas trade relationships, most notably with Europe, is not helping and, whilst the industry’s fundamentals remain strong, a brighter future is only possible if we secure a deal that can help us regain our reputation as an attractive location for automotive investment.”

Car production for the domestic market fell to 22,180 last month, 25 per cent lower than the same time last year, while export output dropped 12.6 per cent to 93,855 vehicles.

Part of the decline was due to some model changes, where manufacturers roll down production of an older model ahead of the introduction of its replacement.

The figures come in the week that the SMMT ramped up its warning over the UK leaving the EU without a deal, saying it would deliver a “knockout blow” to the sector, and cost the industry more than £70m a day.

The trade body, which has become increasingly strident in its criticism of a no-deal Brexit, calculated the figure by estimating the cost of delays to the 1,100 trucks carrying car parts that enter the UK each day.

If they were held for 24 hours, it would result in stoppages at production plants that would cost the industry £50,000 a minute under the worst-case scenario.

Such logistical logjams, combined with tariffs of 10 per cent on exported cars, would “undermine a decade of extraordinary growth”, the body warned.

Stuart Apperley, head of UK automotive at Lloyds Bank Commercial Banking, said: “Many issues the sector faces — from uncertainty around future trading relationships through to negative publicity concerning diesel emissions — are affecting consumer confidence and subsequently hurting sales and, ultimately, manufacturers.

“Promisingly, the sector has proven itself resilient in the past, but more certainty is needed in the coming months.”

A year’s worth of decline is a serious illustration of the pressure that the car manufacturing industry is under in the UK.

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