UK car production driven down by global chip shortage

UK car plants will not return to producing 1mn vehicles a year until at least 2025 — two years later than expected — owing to a global shortage in key parts, a trade body warned on Wednesday.

In March, AutoAnalysis, which calculates production forecasts for industry trade body Society of Motor Manufacturers and Traders, said UK annual car production would rise above 1mn in 2023.

The industry made 1.3mn cars in 2019, which fell to 920,000 in 2020 and 850,000 last year.

But the conflict in Ukraine and continued shortage of semiconductor chips that began in the pandemic led the forecaster to push back the date to 2025, and cut this year’s expected output by 15 per cent.

AutoAnalysis predicted factories will only make 866,000 cars or vans this year — more than last year but some 113,000 lower than its previous forecast from March.

“The impact of the last three to four months was more severe than had been anticipated,” said SMMT chief executive Mike Hawes.

“Car manufacturers have been suffering from a ‘long Covid’ for much of 2022, as global component shortages undermine production and put supply chains under extreme pressure,” he added.

Official figures from the SMMT showed car production in the first six months of the year fell by a fifth to 403,000 vehicles, the worst first-half performance since the pandemic-hit year of 2020.

The closure of Honda’s plant in Swindon and the end of production of the Vauxhall Astras in Ellesmere Port, which will begin producing a new electric van later this year, also contributed to the drop.

Manufacturing levels did rise during May and June, as demand for vans and new models lifted output.

Production of vans in the UK, which come primarily from the Stellantis plant in Luton, increased 47 per cent in the first half of the year.

Carmakers have been hampered by a global shortage in semiconductors since the start of the pandemic, which has curtailed production and caused long waiting lists for many new models.

Jaguar Land Rover said on Wednesday it had an order book of 200,000 vehicles, the highest in its history. Yet the group blamed parts shortages for slowing production of the Range Rover and Range Rover Sport, its latest models, which pushed the group to a £524mn loss for the three months between April and June.

The SMMT wants the UK to make 2mn electric vehicles a year by 2040, an ambition that would require current factories to expand and additional businesses to open sites as well as new battery factories.

“We know a number of manufacturers are looking at European production, whether American, Chinese or start-ups,” said Hawes. “We can make a compelling case to get them here in the UK.”

He said the UK needed to attract investment with tax breaks and mitigate high energy costs that put British plants at a disadvantage to European rivals.

According to data that tracks new investment announcements into car factories, during the past six months the total rose to £3.4bn, up on £606mn last year — its highest first-half level in a decade. The sum, which fluctuates because carmakers often unveil spending plans that cover several years, is just above the long-term average of £3bn.