Press release

6 Dec 2021 London, GB

Winter of discontent and a trinity of challenges for the auto sector

The auto industry continues to reel under pressure from the unholy trinity of Covid 19, semi-conductor shortage and supply chain pressures

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Adam Holden

Senior Manager, Media Relations, Ernst & Young LLP

Passionate media relations and public relations professional helping to provide insight and clarity to complex business issues. Husband and father to twin boys, and a golden retriever.

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

“The auto industry continues to reel under pressure from the unholy trinity of Covid 19, semi-conductor shortage and supply chain pressures. There were just over 115,000 new car sales in November, which was a minor increase of 1.7% compared to 2020 and the first month of positive growth since June. It was however against a lockdown constrained November last year, and a drop of 26% compared to 2019 which is a truer reflection of the market performance and the data distortion if you only consider year on year trends. Record sales of used cars and order banks demonstrate that although consumer demand exists, there simply isn’t enough new car stock to satisfy demand.

EV Sales Continue upward Trend

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

“The growth in electric vehicles (BEV & PHEV) sales continued to provide the proverbial silver lining for the car industry with plug-in vehicles reaching 28% share for the month. The charge of the EV brigade can partly be attributed to measures adopted by the government to promote EVs including consideration being given to mandatory car charge points in newly constructed houses, grants to support chargers at motorway services and tax breaks on new vehicles. However, there is much to do to ensure infrastructure keeps pace with the market demand and equally important are the shift in consumer attitudes to EVs and the more sustainable approach of fleet operators. 

Supply Chain Pressures

“Beyond the well-known issues related to the lack of availability of containers, congestion at ports and a shortage of HGV drivers, the car industry has grappled with rising prices of components. After a slightly bearish October, steel prices increased once again in November. The impact of these prices could be seen on price tags as a leading EV manufacturer announced price increases in November for its two best-selling models. Also, aluminium prices have doubled since April 2020 to over $3,000/tonne leading to pressure on car parts such as gearboxes and fuel caps. This shortage can be partly attributed to the energy crisis in Asian markets, and the resultant shortage of magnesium (a key component for aluminium and steel).

Future Proofing Through Partnerships

“Continuing the recent trend of global partnerships, two of the ‘Big 3’ announced partnerships with semi-conductor manufacturers to ensure a reliable supply of chips to feed their global car demand. The partnerships go beyond an assured supply, but also extends to joint research and a promise to explore joint manufacturing opportunities. These actions will help improve new car supply in the medium and long term globally - including the UK.

Downbeat prediction for 2021

“This year has been a year of record lows. We saw U.K. car production fall to its lowest numbers in almost 70 years, and saw new car sales fall to lowest levels in decades. The misplaced optimism in some quarters at the beginning of the year that a new calendar year would somehow herald a recovery has now given way to pragmatic realisation that recovery is still at least a year away.

“However, one must not lose sight of the positives. The UK consumer’s demand for cars has not abated. The used car market has seen pricing increase by almost 30% year-on-year and 80 consecutive weeks of growth. This heady mix of demand and pricing means that automotive retailers are reporting very positive financial results. The continued rise of EV sales driven at an unprecedented pace driven by government action, shifts in consumer mindset and the media focus on events such as COP26 is opening up new opportunities. Evidently, there is light at the end of the tunnel – but the length of that tunnel is presently unclear.”