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August 27, 2020

UK car production down 20.8% in July

UK car manufacturing output was down 20.8% in July with 85,696 units made as factories struggled to ramp up output in the face of slowly recovering global demand.

By Sam Duke

UK car manufacturing output was down 20.8% in July with 85,696 units made as factories struggled to ramp up output in the face of slowly recovering global demand.

The SMMT said that nearly all UK factories reopened after earlier pandemic shutdowns, but that social distancing measures and ongoing economic uncertainty ‘still stifled output’. 

With almost all UK car showrooms able to open throughout July, production for the UK market improved compared with May and June. However, it still fell by a dramatic 37.1% year-on-year, with just 13,434 units destined for UK customers leaving factory gates. Manufacturing for export also fell, but by a slightly less substantial 16.8% to total 72,262 units.

In the year to date, the impact of the pandemic on key markets, including the UK, means that overall production remains down 39.7%, representing a year-on-year loss of 307,707 cars. Overseas shipments in the first seven months are now down 38.5% to 381,273 units, with production for the UK market falling 44.5% to 85,780.

Mike Hawes, SMMT chief executive, said: “As key global markets continue to re-open and UK car plants gradually get back to business, these figures are a marked improvement on the previous three months, but the outlook remains deeply uncertain.”

Hawes also highlighted the looming danger of a ‘no deal’ Brexit, with UK and EU negotiators making little progress on putting in place a free trade agreement by the end of the year when the UK’s Brexit ‘transition’ period ends.   

“With the sector now battling economic recession as well as a global pandemic, it has neither the time nor capacity to deal with the further shock of a ‘no deal’ Brexit,” Hawes said. “The impact of tariffs on the sector and the hundreds of thousands of livelihoods it supports would be devastating, so we need negotiators on both sides to pull out all of the stops to ensure a comprehensive free trade deal is agreed and in place before the end of 2020.”

Andrew Burn, KPMG’s Head of Automotive, took a positive view of the trend. He said: “Whilst production volumes are 20% down when compared to July 2019, if you look at it the other way, manufacturers are producing around 80% of last year’s volumes, so even though uncertainty continues, the direction of travel is positive.

“However, whilst it’s great for car manufacturers who serve a global market, with around 80% of vehicles manufactured in the UK for export, we cannot forget that at a domestic level there are a number of challenges. Many manufacturers of components are highly operationally geared and therefore in many cases, small changes in volumes mean the impact is felt on the bottom line more directly than in other sectors. Also, given that the UK was the hardest hit economically, out of major economies, by the pandemic in the three months to June, a longer recovery time for many sectors is to be expected.

“Also, the lower production level for the UK market continues to suggest that fewer people are buying new cars, although the used car market is seeing strong demand at the moment with many valuing instant access over long lead times in the current environment.”

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