Tough economic environment ‘overshadows’ auto manufacturing recovery in August

An “extremely difficult and uncertain economic environment” for automakers overshadowed a 34% recovery in productivity in August, the SMMT said.

The latest data released by the Society of Motor Manufacturers and Traders (SMMT) showed car production in the UK increased by 34% to 49,901 units last month.

But the industry body pointed out that the year-on-year growth came 12 months after a dismal 2021 result, meaning volumes remained down 45.9% before the pandemic. of August 2019.

Year-to-date, however, overall production remains down 13.3% from the first eight months of 2021 to 511,106 units.

And while the SMMT welcomed the UK government’s energy price cap, it warned that the limits of the six-month support plan risked creating a “springtime cliff edge” for businesses, as seven out of 10 companies expressed concern about their future operations.

SMMT chief executive Mike Hawes said: “While another month of rising UK car production is welcome news and a testament to industry efforts to overcome supply chain shortages, it overshadows an extremely difficult and uncertain environment for builders.

SMMT Managing Director, Mike Hawes“Volumes have dropped dramatically and businesses need to take drastic action to protect their businesses from a myriad of challenges.

“Government measures announced last week to reduce crippling energy costs provide valuable relief, but long-term action is needed to restore stability and provide the sector with a globally competitive investment framework.

“Reforming business tariffs, improving capital allocations, affordable and secure supply of low-carbon energy, and investing in new skills can enable this vital sector to drive economic growth, improvements productivity, the balance of business benefits and the job security the UK badly needs.”

SMMT analysis showed that the UK car manufacturing sector’s combined energy costs – already the highest in Europe – had risen by £100m over the past 12 months to over £300m .

However, costs are expected to more than double again next year.

Energy is now the top concern for UK automakers, outpacing component supply constraints, with almost seven in 10 SMMT members (69%) worried about the impact of onerous cost increases on their business operations.

Nearly nine in 10 OEMs (87%) had to pass on costs, fueling inflation, SMMT said, with 41% forced to delay or cancel investments, 13% to cut teams and 9% to resort to job cuts.

Expressing the difficult situation automakers are facing in the current economic climate, KPMG’s Head of Automotive in the UK, Richard Peberdy, said: “Gradual easing of global supply shortages, together with support government on energy costs will help UK car production for years to come. month. But inflation is driving up input costs, and a weaker pound threatens to do so even more.

“Passing costs on to the consumer is becoming increasingly difficult, although at this point manufacturers continue to have heavy order books.”

SMMT UK car production data, August 2022UK car production last month saw a 33.1% increase in volume for UK customers (10,709 units), while the number of cars built for export rose 34.2% to 39,192 .

Electric vehicle (EV), plug-in hybrid (PHEV) and hybrid (HEV) production also increased, accounting for almost a third (32.2%) of all cars (16,059 units).

Production of electric vehicles more than doubled, increasing by 115.9% to account for nearly one in 10 cars produced.