In a stark reflection of the difficulties facing the automotive sector, vehicle production in the UK plummeted to its lowest level since 1952, with the Society of Motor Manufacturers and Traders (SMMT) reporting a total output of just 764,715 vehicles in 2022. This figure represents a significant 15.5% decline compared to the previous year, marking what SMMT Chief Executive Mike Hawes described as “the toughest year in a generation.”
Factors Behind the Decline
Several key factors have contributed to this downturn, including a major cyberattack on Jaguar Land Rover that disrupted operations, the permanent closure of Vauxhall’s Luton facility, and ongoing uncertainty surrounding US trade relations. The closure of Vauxhall’s plant, which ceased operations in March, was particularly damaging, as it was a significant contributor to the production of commercial vehicles, which saw a staggering 62% drop to just 47,344 units.
The crisis in vehicle manufacturing has not only been attributed to these one-off incidents. The broader context includes the fallout from Brexit, the lasting impacts of the COVID-19 pandemic, and supply chain disruptions that have collectively eroded the UK’s automotive output. In stark contrast, the UK produced 1.7 million vehicles as recently as 2016, highlighting the steep decline over the past several years.
Future Prospects for the Industry
Despite these challenges, there is cautious optimism for the future. The SMMT is forecasting a potential recovery in 2023, with an anticipated 10% increase in car production as new electric models come to market. Hawes emphasised that there exists a “pathway” to boost output to more than 1 million vehicles annually by 2027, contingent upon the successful rollout of new models and a rebound in demand from key export markets, particularly within Europe.
However, this optimistic outlook is shadowed by threats from emerging EU policies that may impose stricter regulations on vehicle production and exports. Hawes warned that proposals to restrict government subsidies for low-emission vehicles to those manufactured in the EU could pose significant risks to the UK industry, potentially isolating it from crucial European markets.
Challenges with Electric Vehicle Production
The transition towards electric vehicles (EVs) is a focal point for the industry, with major manufacturers like Nissan and Jaguar Land Rover investing in new technologies and models. Nissan’s latest electric Leaf began production in December, while Jaguar Land Rover is gearing up to roll out its electric Range Rover and new Jaguar models later this year. Nevertheless, the shift to electric is not without its challenges. The upcoming EU ‘rules of origin’ regulations will require a greater proportion of components used in EVs to be sourced from within the EU or the UK to avoid tariffs, yet many current vehicles do not meet these criteria due to insufficient battery production capacity in the UK and Europe.
Government Response and Industry Sentiment
The UK government has set ambitious targets, aiming for 1.3 million vehicles to be produced annually by 2035. Achieving this goal will likely necessitate the establishment of a new manufacturing facility, with speculation that a Chinese firm could lead the charge. However, Hawes has stressed the importance of the government implementing its Modern Industrial Strategy, particularly in tackling the high cost of energy which continues to burden manufacturers.
The industry remains acutely aware of the potential pitfalls ahead, with Hawes highlighting the critical need for the UK to remain competitive and integrated within the European automotive ecosystem. The fear is that restrictive measures could replicate some of the adverse effects of Brexit, complicating access to the European market and dampening production further.
Why it Matters
The decline in UK vehicle production is not merely a reflection of an industry in distress; it has far-reaching implications for the economy, employment, and the transition to a sustainable automotive future. As the sector grapples with these challenges, the actions taken by government and industry leaders will be pivotal in shaping the trajectory of one of the UK’s most significant manufacturing sectors. The ability to adapt and innovate will determine whether the UK can reclaim its position on the global automotive stage or face further decline in a rapidly evolving market.
