Press release

5 Jul 2022 London, GB

A ‘70’s style’ crisis brewing for the UK automotive industry

UK car industry continues to struggle in the face of significant economic and geo-political headwinds

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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 June 2022:

“Rising inflation, supply chain pressures, geopolitical unrest and Covid continued to negatively impact the UK car industry in June 2022. SMMT data showed that almost 141,000 cars were registered in June which was a -24.3% decrease over 2021, and almost a 37% reduction over pre-pandemic 2019. It was also the weakest June performance since 1996. Despite unprecedented high demand for new cars the industry continued to experience multiple headwinds, with industry leaders increasingly looking to the UK Government for further support.

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

“The supply chain issues are leading to increasingly long lead times for consumers to get behind the wheel of new cars. Beyond the well-publicised availability of semi-conductors and wiring harnesses, there are emerging risks on skill shortages and operational risks of cyber-attacks, that have been amplified by the tensions in Europe and Asia. The CEO of a major chip manufacturer also stated that the chip shortage is expected to last until 2024, highlighting how systemic that issue is.

“In a global industry such as automotive, volatility in a key markets for the sector’s supply chain can have a significant impact for the whole sector. Recently, lockdowns in China have not only impacted that domestic market, but also the availability of service parts and new cars in international markets including the UK. 

Electric car sales

“EV sales in the UK continued to show positive growth with SMMT data revealing that just over 30,000 plug in cars were registered in June 2022 and 166,000 in 2022 for the year so far. This now means an increasing market share of just over 20% or 1 in 5 cars being sold.

“June 2022 also saw the UK government ‘pull the plug’ on plug-in grants for cars. The rationale for this withdrawal was that funding was being redirected to help expanding the public chargepoint network as well as electric taxis, vans, trucks, motorcycles and wheelchair accessible vehicles. That said, however, this development will most likely have an impact on the EV market which is presently the only bright spot in an industry reeling under unprecedented challenges – how much of an impact remains to be seen.

“For the whole industry, it will be important to see how the transition accelerates on the continent, as the European Council recently agreed to introduce a 100% CO2 emissions reduction target by 2035 for new cars and vans as part of the Fitfor55 package.

Looking ahead

“The UK automotive industry is a vital part of the UK economy, with the motor industry directly 

contributing £14bn in Gross Value Added. However, it is facing a crisis similar to that seen in the 70s. Rising inflation and high prices are causing significant damage to the industry. The industry and its almost 800,000 employees require assistance from the government in the form of better trade deals and replacement of support mechanisms such as the apprentice levy. Also, there is a need for greater assistance related to research and development grants, considering that 11% of all R&D investment in the UK comes from the automotive sector. 

“A positive, however, is the continued resilience exhibited by the industry. OEMs, suppliers & retailers alike have shown a positive shift towards electrification and transformation of their supply chains and meeting new consumer buying trends. As an example, UK car production was up 13.3% in May which was the first growth after 10 consecutive months of decline. These positives give everyone a sense of hope that just like the crisis in the 70s, this too shall pass and the industry will continue to thrive.”