The lowest number of cars rolled out of British factories last year since 1956, as the industry warned that rising energy costs and further shortages of computer chips will plague its recovery.
Car production slumped across the UK and the world in 2020 as the coronavirus pandemic swept across the globe, but many in the industry had expected a rapid improvement. Instead, the disruption triggered a global shortage of semiconductor chips, leading to an even worse 2021.
Total UK car production fell by 6.7% to just under 860,000, according to the Society of Motor Manufacturers and Traders (SMMT), the industry lobby group. Its chief executive, Mike Hawes, described it as “a dismal year”, with output down by more than a third on 2019.
Jaguar Land Rover’s output for the year fell by a 10th compared with the year before, but the carmaker managed to regain its title as the UK’s largest manufacturer, after briefly losing out to Nissan in 2020.
Hawes said the industry had managed to cope with the extra costs of Brexit, although he added that executives were watching recent delays at the Dover Channel crossing.
However, Hawes warned that energy price increases that have also hit households were set to add further to UK carmakers’ difficulties. He said the industry urgently needed “measures to mitigate the escalating energy costs which are threatening viability,” and warned that higher costs could feed through to higher prices.
Factories are braced for price increases of up to 70% when old contracts expire. Energy is generally carmakers’ third-highest cost, after materials and labour, but the sector is lobbying to be designated as an energy-intensive industry in order to qualify for extra government support.
Nevertheless, Hawes said the industry was approaching 2022 with “a lot more optimism”, particularly as the supply of semiconductors rises to meet demand after earlier investments by chip manufacturers. He said he expected the industry to return to 1m cars produced annually on a consistent basis – although he added that a return to the more than 1.7m cars built in 2016, the year of the Brexit referendum, was unlikely without new manufacturers choosing the UK.
The SMMT did highlight £4.9bn in investment announced during the year by the automotive industry – although that included the speculative announcement of £2.5bn by Coventry council in a battery factory project that is yet to attract a lead investor.
The number of battery electric cars with zero exhaust carbon emissions produced in the UK rose by 72% during 2021, but it remains only a 12th of overall UK output.
The UK’s van industry performed considerably better than passenger car makers, with production up 24% on 2020 and up 3% compared with 2019. Hawes said the online shopping delivery boom had contributed to “extraordinarily high demand” for vans.