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February 28, 2019

UK car production down 18% in January

British car production fell 18.2% in first month of the year, reflecting model changes and weaker demand in both the UK and key export markets.

By Sam Duke

British car production fell 18.2% in first month of the year, reflecting model changes and weaker demand in both the UK and key export markets.

The SMMT said it was the eighth successive month of decline but maintained that despite global pressures, Brexit 'remains the clear and present danger' and called again for the immediate and permanent removal of a so-called 'no deal' UK departure from the EU.

The data showed that British car factories turned out 120,649 units in January and while demand dropped at home and overseas, it was exports that fell most, down 21.4% on the same month last year to stand at 93,781 units.

The SMMT said that further softening in key Asian and European markets drove much of the decline, with output destined for China down 72.3% and the EU27 20.0% off last year's pace. Model changes also played a significant part. Meanwhile, manufacturing for the domestic market fell by 4.8% as political uncertainty continued to dent consumer confidence.

Mike Hawes, SMMT Chief Executive, said: "Another month of decline is a serious concern. The industry faces myriad challenges, from falling demand in key markets, to escalating global trade tensions and the need to stay at the forefront of future technology. But, the clear and present danger remains the threat of a 'no deal' Brexit, which is monopolising time and resources, undermining competitiveness. Every day a 'no deal' Brexit remains a possibility is another day automotive companies pay the price in additional and potentially pointless costs. 'No deal' must be taken off the table immediately and permanently."

Almost a third of automotive companies responding to a recent SMMT survey said they had postponed or cancelled UK investment decisions because of Brexit, with one in five having already lost business as a direct consequence. Over half said that contingency plans were being executed, with more than one in ten (12.4%) relocating operations overseas and the same proportion reducing UK headcount.

Analysts noted that the UK automotive sector is facing a number of headwinds. Lloyds Bank Commercial Banking's head of UK automotive, Stuart Apperley, said that while there are a number of headwinds that are significantly impacting the sector, it has proven its resilience in the past.

"Although uncertainty around the UK's future trading relationships is proving challenging for some car makers, of arguably more significance in the long run are slowing sales in China and regulatory changes which have made diesel less viable," he said. "Manufacturers are assessing the economic viability of their plants with some choosing to cut back on capacity.

"While it's easy to be downbeat, it's important to remember it isn't all doom and gloom and the sector has proven resilient in the past. Indeed out of the gloom of 2008, the UK's automotive sector emerged with some real winners to be found. Today, UK automotive companies will be hoping they can repeat its success once the current headwinds subside.

"UK carmakers also continue to invest in new areas of growth, such as electric and autonomous vehicles, which should provide avenues for future success."

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