UK car production has experienced a notable decline, with output dropping by 20.6% as manufacturers transition to electric vehicles. The decrease is influenced by various market dynamics.
The shift in focus towards zero-emission vehicles is integral to the industry’s future. Yet, this transition is accompanied by challenges, especially in major export markets.
Decline in Production and Export Performance
In September, the UK automotive sector experienced a significant downturn, with total vehicle production falling by 20.6%. This was primarily influenced by substantial reductions in both domestic and export markets. Production for the UK market dropped by 20.8%, while exports saw a decrease of 20.6%. Notably, September of the previous year had been a remarkably productive month, further magnifying this year’s comparative downturn.
Despite the September setback, cumulative figures show that production for the UK market has increased by 6.5% in the current year. However, this growth has been negated by a marked 14.4% decline in export volumes—resulting in an overall production decrease of 10.2% year-to-date. To date, 592,862 car units have been manufactured in 2024.
Impact on Key Export Markets
The decrease in export volumes impacted several major international markets. Notably, shipments to China, a crucial destination for UK car exports, fell by 23.1% in September. This decline correlates with China’s current economic challenges, as its GDP growth in the third quarter lagged behind governmental targets, affecting demand for imported vehicles.
Conversely, in the EU, the UK’s largest market for car exports, an even sharper decline was observed. Exports to the bloc dropped by 28.6% to 26,825 units in September. The reduction in shipments coincided with weaker car sales across the EU, with countries like Germany, France, and Italy experiencing substantial decreases.
US Market as a Bright Spot
Amidst the challenges, the US market presented a positive development for the UK automotive industry. During September, car exports to the US increased by 24.6%, reaching 8,210 units. This rise made up 16% of the UK’s total car shipments, highlighting the US as a significant growth area amid declines elsewhere.
The increase in US exports contrasts sharply with the decline in other major markets and offers a potential avenue for balancing the deficits experienced in the EU and China.
Shift Towards Electric Vehicles
A key factor in the production decline has been the automotive industry’s strategic shift towards electric and hybrid vehicles. This transition aligns with the UK’s goal to phase out internal combustion engine vehicles by 2030. In September, nearly one-third of cars produced were battery electric, plug-in hybrid, or hybrid models.
Mike Hawes, CEO of the Society of Motor Manufacturers and Traders, characterised these declines as expected and temporary. He emphasised the necessity for sufficient industrial and market conditions to encourage growth. Hawes also urged the government to utilise fiscal policies and strategic initiatives to fortify the automotive sector’s competitiveness and investment allure.
Economic Contributions of the Automotive Sector
While production numbers have declined, the UK automotive sector maintains its status as the leading exporter of manufactured goods. It accounted for 13.9% of all UK exports in the first half of 2024, underscoring its economic significance.
Manufacturers continue to pivot towards zero-emission vehicles, which necessitates robust government policies and financial backing to sustain global competitiveness and meet the growing demand for electric vehicles.
Challenges and Opportunities Ahead
Despite facing production slowdowns, the automotive sector is positioned for a transformative shift towards sustainable technologies. The industry’s reliance on government support is crucial for maintaining its competitive edge globally.
There is optimism that these strategic adjustments will not only align with environmental goals but also reinvigorate the sector’s growth. Embracing innovative technologies and environmentally friendly practices can create new opportunities for expansion and market leadership over time.
As the UK automotive industry navigates the shift to electric vehicles, the short-term production downturn is significant. However, strategic adjustments and governmental support can lead to sustainable growth.
