Optimism for UK car industry as production ramps up

The UK car industry is optimistic of a long-awaited production rebound after new figures from the Society of Motor Manufacturers and Traders revealed a significant 13.1% uptick in cars produced here last month. A total of 69,707 cars left factories around the country last month – 8050 more than in February 2022 – with production for home and overseas markets rising by 20.3% and 11.5% respectively. Production of cars using battery-electric, plug-in hybrid and pure-hybrid powertrains rose by 72.2% year on year, from 15,905 units to 27,392 units. That means two in five (39.3%) cars produced in February were electrified in some form. A major factor in the production ramp-up was the easing of supply chain shortages, most importantly of semiconductors. Since early 2021, manufacturers struggling to find chip suppliers have been plagued with issues, with some manufacturers halting production of certain less profitable models. Mike Hawes, SMMT chief executive, said: "February’s growth in UK car production signposts an industry on the road to recovery. The fundamentals of the sector are strong – a highly skilled workforce, engineering excellence, a sector that is embracing new electrified vehicle manufacturing and wide ranging capabilities in the EV supply chain." Exports accounted for 81.2% of total output, with 56,634 cars produced for global orders, which represents an increase of 5848 units on February 2022. Some 51.6% of UK exports were shipped to the EU, the UK's largest trading partner, representing a rise of 6.5%. Exports further afield to Turkey, Japan, Australia and South Korea rose collectively by 85% and accounted for a total of 6498 cars. However, there were dips in exports to America (down 19.9%) and China (down 21.6%). Hawes said: "To take advantage of global opportunities, we must scale up at pace and make the UK the most attractive destination for automotive investment by addressing trading and fiscal costs and delivering low-carbon, affordable energy.” However, while production numbers appear to be showing signs of recovery, around eight in 10 automotive businesses have reported rising input and employment costs in the past three months, citing action to alleviate high energy costs as their number one concern. Energy costs contributed to a “deeply depressing year” over 2022, according to Hawes. He said: “There were price increases last year. If higher input costs continue, that will flow through into pricing, and the margins on volume car producers are already wafer thin.” In addition, Bentley's chief financial officer Jan-Henrik Lafrentz recently said it was becoming much more difficult to hire staff in the post-Brexit era. He said that the time it takes to get a visa makes it impractical for a firm that belongs to an international conglomerate to easily operate and exchange staff, making the UK “less attractive to investors”.