British car production falls 18.2% year-on-year in Covid slump

Decline driven by subdued demand in the EU and US but exports to Asia accelerate

Members of staff working on a car assembly line at the Vauxhall car factory in Ellesmere Port, UK. The decline in car production means 24,490 fewer vehicles were made in October than in the same monthShow more

British car manufacturing slumped by 18.2 per cent on the year in October as the coronavirus pandemic and heightened movement restrictions continued to hit demand.

The decline in production means 24,490 fewer cars were made in October than in the same month last year, with only 110,179 cars rolling off assembly lines, according to the Society of Motor Manufacturers and Traders (SMMT).

Meanwhile, Covid-19 also subdued demand from key markets, such as the European Union and US, driving exports down 19.1 per cent as output for UK buyers also fell.

“These figures are yet more bad news for an industry battered by Covid, Brexit and, now, the unprecedented challenge of a complete shift to electrified vehicles in under a decade.

“While the sector has demonstrated its resilience, we need the right conditions to remain competitive both as a manufacturing nation and a progressive market,” said Mike Hawes, chief executive of SMMT.

The UK will ban sales of new petrol and diesel cars from 2030, a decade earlier than planned, as revealed in Prime Minister Boris Johnson’s 10-point plan for a “green industrial revolution” earlier this month.

Under the new proposals, the government will invest £1.3 billion ($1.73bn) on creating more electric vehicle charging points in homes and streets across England, and make £582 million available in grants for people to buy zero or ultra-low emission vehicles.

The automotive industry is concerned that relying on expensive electric vehicles will price lower-income workers out of the market.

Mr Hawes said Rishi Sunak’s spending review on Wednesday recognised the need to invest in a green industrial revolution, but this must be “at globally competitive levels” and “equal to the scale of ambition to keep this sector match fit”, he warned.

Britain's automotive sector is also awaiting clarity on the trading terms it will have with its biggest export market, the European Union, after the end of the post-Brexit transition period on December 31.

A ‘no deal’ could see production losses cost as much as £55.4bn over the next five years, said the SMMT, with even a threadbare trade deal expected to cost the industry about £14.1bn.

“Above all, we must have a Brexit deal, one with zero tariffs, zero quotas and rules of origin that benefit existing products and the next generation of zero emission cars, as well as a phase in period that allows this transition to be ‘made in Britain’,” Mr Hawes said.

October’s decline was caused mainly by falling exports, particularly to the EU and US, which was equivalent to a loss of 21,569 vehicle sales.

Shipments to the US declined 26 per cent in October year-on-year and to the EU by 25.7 per cent. Major Asian markets fared better, with exports to Japan and China up 57.1 per cent and 9.7 per cent respectively – economies that have already started their recovery from Covid-19 and have less stringent lockdown measures in place.

However, the strong Asian demand was not enough to offset losses elsewhere, said the SMMT, with production for the UK market also falling 13.6 per cent to 18,629 units, with 2,921 fewer cars made for buyers in the UK than a year earlier.

October’s performance rounds off a tough 10 months for UK car makers and suppliers, with production now down 33.8 per cent since January to 743,003 units – a year-on-year shortfall of 379,308 units, which is worth about £10.4bn.

Earlier this month, British luxury car maker Bentley Motors said its model line-up will include only plug-in hybrids and electric cars until 2026 and will be fully electric by 2030. The Volkswagen-owned company said it would reinvent every aspect of its business to become an end-to-end carbon-neutral organisation.