UK car production slumped by almost a third in 2020 amid Covid disruption

Brexit uncertainty also depressed market demand in key export destinations

Workers on a production line at Nissan's car plant in Sunderland Britain. UK car manufacturing fell 29.3% to 920,928 vehicles last year compared with 2019. Reuters

UK car production slumped by almost a third in 2020 – the weakest annual output since 1984 – as Covid-19 slammed the brakes on the sector, new data showed on Thursday.

UK car manufacturing, which mostly serves foreign markets, fell 29.3 per cent from 2019 to 920,928 vehicles, according to the Society of Motor Manufacturers & Traders. Output in December was also down 2.3 per cent to 71,403 units after some companies were affected by delays at British ports.

"These figures, the worst in a generation, reflect the devastating impact of the pandemic on UK automotive production, with Covid lockdowns depressing demand, shuttering plants and threatening lives and livelihoods," said SMMT chief executive Mike Hawes.

"The industry faces 2021 with more optimism, however, with a vaccine being rolled out and clarity on how we trade with Europe, which remains by far our biggest market."

The Covid-19 crisis cost the car industry heavily last year, with new car registrations falling to 1.63 million last year, a decline of 29 per cent on 2019, with the bulk of the sales lost during the first lockdown last spring.

While lockdowns and social distancing measures restricted factory output, Brexit uncertainty was also a factor as it depressed market demand in key export destinations.

Although Britain's automotive sector, which sells more than 80 per cent of its vehicles abroad, was a big winner from the EU trade agreement because it allows for tariff-free trade, it was still affected by delays caused by paperwork and border controls.

Honda halted manufacturing at its UK plant in December after the Japanese carmaker was hit by delivery delays on spare parts through Britain's ports when companies began stockpiling ahead of the Brexit deadline.

Despite the difficulties, the EU remained the biggest export destination for the UK last year, taking a 53.5 per cent share even though volumes fell 30.8 per cent to 400,460 units.

“The immediate challenge is to adapt to the new conditions, to overcome the additional customs burdens,” said Mr Hawes.

Last week, Japanese carmaker Nissan committed to its future in Britain, home to the group's largest European factory, citing the country's Brexit trade deal with the EU.

Shipments to the US, Japan and Australia fell last year, by 33.7 per cent, 21.6 per cent and 21.8 per cent, respectively. Meanwhile, exports to China, South Korea and Taiwan, rose 2.3 per cent, 3.6 per cent and 16.7 per cent, respectively.

One bright spot for British car manufacturing was the UK’s increase in production of battery electric, plug-hybrid and hybrid vehicles. Combined production of these models rose to 18.8 per cent of all cars made in the UK, up from 14.8 per cent a year earlier.

Looking ahead, UK car production is expected to partly recover this year to one million units, according to independent forecasters.

This year’s performance will depend on the impact of the virus, the speed with which showrooms can reopen and how quickly manufacturers can adapt to “much more complicated” EU trading arrangements, said Mr Hawes.