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Will Supply Chain Problems finish off the UK Car Manufacturing Industry?

In 1922, there were 183 motor companies in the UK: by 1929, following the slump years, there were still 58, with production dominated by Morris and Austin. In 1932, the UK overtook France to become Europe’s largest car producer – a position it held until 1955. In 1937, the UK produced 379,310 cars and over 100,000 commercial vehicles.

Production continued to grow, with the all-time high reached in 1972 when the UK built 1.92m cars. The record for this century was in 2016, with 1.72m cars. Since then, however, we have seen a sharp decline in numbers, with 2016’s figures halved to 860,000 last year. Last month brought the news that the UK had built 100,000 fewer cars than in the same period last year – meaning that we are almost certain to see another decline in overall numbers this year. 

Anyone who has watched a news bulletin will be able to list the reasons: first the pandemic, global supply chain problems and now rising energy costs. 

The main problem is the supply of semiconductor chips, which perform an increasing number of functions in cars, from airbags to emergency braking systems to the ever-more-common touchscreens. And as we move increasingly towards electronic vehicles we’re going to need even more chips. 

The problem is that the wait times for the chips are increasing, not decreasing, with the recent lockdowns in Shanghai – and the knock-on effects on the port there – having made the situation significantly worse. There have even been concerns expressed in the US that China is seeking to dominate and control the future supply chain for both electronic and autonomous vehicles. 

So where does that leave the UK car manufacturing industry? Aston Martin, Bentley, Rolls Royce and Jaguar all make cars in the UK – as do Nissan, who last year committed to a major expansion of their Sunderland plant, creating 1,600 new jobs. Overall, there are around 800,000 people employed in the UK car industry, so it remains vital to the country’s economy. 

The UK, though, is now a long way down the global league table, ranking 18th in 2021 – directly behind Slovakia and just ahead of Iran. Output in the top five countries – China, the US, Japan, India and South Korea – dwarfs that of the UK, meaning that the manufacturers of semiconductor chips have much bigger markets than the UK.

Given the demand for the high-end cars that the UK specialises in, we are not likely to see the industry disappear any time soon, but the longer the supply chain problems continue, the more vulnerable the UK’s car industry becomes. According to the Society of Motor Manufacturers and Traders, the industry has a turnover of nearly £80bn, adds £15.3bn of value to the UK economy and sees eight out of every ten cars produced exported. It’s an industry we cannot afford to lose. 

Sources
Wait times for semi-conductor chips increase due to China lockdown https://www.zerohedge.com/markets/wait-times-semiconductor-chips-rise-supply-chains-remain-congested
Ukraine war drives supply chain crisis https://www.zerohedge.com/economics/ukraine-war-revives-supply-chain-crisis
UK car production down as energy costs rise https://www.bbc.co.uk/news/business-61248689
China EV manufacturers grapple with rising costs https://www.zerohedge.com/markets/chinese-ev-manufacturers-grapple-rising-raw-material-costs-shrinking-margins
China looking to control global EV supply chain? https://www.zerohedge.com/markets/chinese-regime-seeks-control-global-ev-supply-chain-leaving-us-vulnerable-experts
Statista https://www.statista.com/statistics/298923/total-number-of-cars-produced-in-the-united-kingdom/
Wiki https://en.wikipedia.org/wiki/Automotive_industry_in_the_United_Kingdom#:~:text=In%201932%2C%20the%20UK%20overtook,cars%20and%20113%2C946%20commercial%20vehicles.
League table https://en.wikipedia.org/wiki/List_of_countries_by_motor_vehicle_production

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