David Borland, EY UK & Ireland Automotive Leader, comments on SMMT new car registration figures for August 2022:
“The trilemma of financial, energy and supply chain pressures continue to impact all sectors, with automotive at the centre of the storm. Despite the continued challenges, the quiet month of August sales showed some green shoots with a 1.2% increase vs 2021. SMMT data showed that almost 69,000 cars were registered, but this is still 25% less than the same month pre pandemic. Positively, production levels in the major markets are showing an upward trend, with demand for semi-conductors dropping due to the cost of living and inflation rises reducing consumer demand for big-ticket purchases like personal computers and electronics.
Manu Varghese, from EY’s UK & Ireland Advanced Manufacturing & Mobility Team, adds:
“Although most automakers announced favourable Q2 earnings on the back of high demand and transformed inventory management practices, rising prices of components dented margins as OEMs continued to feel the heat from supply chain pressures. A British luxury car maker reported a H1 pre-tax loss of £285 million while another global automaker made 3,000 roles redundant in August as part of their cost rationalisation measures – worrying signs as we potentially head towards a recession. Also, urgent action is needed to bring down the high energy costs faced by automotive factories if their competitiveness is to be sustained. A clear challenge for the new Prime Minister.
Electric Vehicle (EV) sales
“Although August saw a minor dip in petrol prices for the first time in months, that was not enough to materially impact EV sales or consumer demand for electric vehicles. EV sales in the UK continued to show positive growth with SMMT data revealing that 14,000 plugin vehicles were sold in August 2022. Pure battery increased by 35% year on year, with plugin hybrids continuing their demise with a 23% reduction. This follows the global trend, with plug in vehicles now over 10% as more nations and states introduce sales bans for combustion engine vehicles.
“However, the need of the hour is to increase investment in giga factories within the UK. Europe, led by Germany and France, have announced approximately 35 new giga factories to be operational by 2035. As more car manufacturers partner with battery suppliers around the world, the UK needs to ensure it remains a destination of choice by making the investment now.
Forward Look
“The industry continues to be disrupted, with manufacturers striving to find the strategic balance of their combustion engine and electric vehicle divisions. This opens up further opportunities for sector convergence with energy players looking to invest in automotive and tap into new value pools. “As a sign of the heritage the automotive sector has, the opening ceremony of the Commonwealth games in Birmingham demonstrated the importance it holds in people’s imagination. The Alexander stadium saw Rovers, Jaguars and Minis from various decades being showcased to the world. As the industry passes through these turbulent times, industry leaders and shareholders look towards Whitehall for help and funding in battery capacity, charging infrastructure with clarity on trade.”
