Challenging year ahead for the UK car industry, despite new year cheer

David Borland, EY UK & Ireland Automotive Leader, comments on SMMT new car registration figures for January 2023:

“There is some much-needed new year cheer for the automotive industry in these latest figures. There were 132,000 new car sales in January, which was an increase of almost 15% compared to January 2022, albeit 12% lower than in pre-pandemic January 2020. This represents a significant improvement on figures we saw in 2022, when new car registrations were consistently 30% lower than pre-pandemic levels. The sector continues to be heavily affected by a trilemma of supply chain issues, the cost-of-living crisis and the move to net zero.”

Manu Varghese, from EY’s UK & Ireland Advanced Manufacturing & Mobility Team, adds: 

“UK car production declined by almost 10% in 2022 to 775,014 units, according to the SMMT. Reduced manufacturing output across the sector has largely been driven by the global shortage of semiconductors and the impact of supply chain disruptions in Asia, as well as plant closures. However, it’s not all negative news as most of the volume loss in 2022 occurred in the first half of the year, with four months of growth in the second half. The SMMT figures have also revealed record levels of EV production, with almost a third of all cars made either fully electric or hybrid – worth £10bn in exports alone. 

“Pandemic restrictions lifting overseas will have brought relief to Original Equipment Manufacturers (OEMs) in the UK, and globally. This will help ease supply chain pressures, although it’s reasonable to expect some continued disruption through this year and into 2024.” 

Automotive sector has reasons for optimism 

David Borland adds: “The announcement of 2022’s Q4 and full year results is highlighting a mixed bag in performance for many of the global manufacturers and suppliers due to the well-known supply chain struggles and required capital investments for new programmes. 

“On a global basis, job losses in automotive continue with traditional players and new entrants announcing significant restructuring efforts as businesses reshape for the future. Positively, we have started to see some manufacturers reporting a return to profitability on the back of easing supply chain concerns, as well as seeing benefits realised from ongoing transformation programmes. 

“Despite these reasons for optimism, there’s no doubt that the UK automotive sector is at a critical juncture. It plays an important role in the UK’s economic viability, leveraging our strength in manufacturing and innovation with a skilled and flexible workforce. To ensure the full potential of the industry is realised, it is vital that UK policy supports the sector and generates public and private investment.”