UK builds 450,000 cars in six months as industry bounces back

The recovery of the UK car industry continues apace, as local production surged 11.7% over the first half of 2023, with June confirmed as the fifth consecutive month of growth. Some 450,168 cars left UK factory gates from January to June, up from 403,131 in the same period last year. June alone accounted for 84,767 units, an increase of nearly 12,000 cars. It was the best first half for UK car production since 2021, and demonstrates – according to the Society of Motor Manufacturers and Traders – that "manufacturers were increasingly able to manage global supply chain challenges – notably the shortage of semiconductors – that had constrained production since the pandemic". The increase has mainly been driven by a 13.6% increase in cars built for export, which account for 80% of the UK industry's output - but production for the domestic market was up 4.5%, too. The SMMT emphasises the importance of "safeguarding" the bilateral trading relationship between the UK and the EU, given the latter is both the primary source of imported vehicles and the UK's largest export market, with 59.5% of all Brit-built cars heading across the Channel. That figure is a reminder of "the need for a quick and positive outcome to discussions on forthcoming changes to the rules of origin requirements for electrified vehicles and components," the SMMT said. Chief executive Mike Hawes told reporters "the relationship between the UK and EU is paramount, especially as you get towards the import and export of electric cars" - a subject of much consideration as the industry grapples with the onset of potentially punitive 'rules of origin' from 1 January 2024. Meanwhile, production of hybrids, plug-in hybrids and battery-EVs increased 71.6% to 170,231 units, meaning more than a third of all cars built in the UK so far this year have been electrified. While car production in the UK is on the increase, output still languishes far below pre-pandemic levels; in the first half of 2019, the most recent full year of 'normal' production unimpeded by lockdowns and supply chain shortages, the UK produced more than 666,000 cars - and even that was down 20.1% on the year before. That decline takes into account the closure of Honda's factory in Swindon in mid-2021 and the end of Vauxhall Astra production at Ellesmere Port last year, but the SMMT says it also points to the "opportunity for UK car makers to recover if a globally competitive business investment environment can be assured". The SMMT hopes that yearly output can come close to the one-million-unit mark in 2028, projecting a final tally of 860,000 units by the end of this year. The news comes just a week after JLR parent company Tata made the landmark announcement that it would build an EV battery factory in the UK - a lifeline for the domestic car industry, which previously faced an uncertain future without a local power supply for the electric cars it must produce. JLR CEO: Tata batteries "fundamental" for UK automotive industry Hawes acknowledged "all the positivity" around the latest production figures and Tata's investment in the UK, but cautioned against complacency: "The key thing for us is: how competitive are we to grow the industry here, attract new entrants and so forth? "The biggest obstacle is energy costs, which people will cite. [We're] still having to pay up to twice as much for energy as in many competitive investment locations. In a recent survey, nine out of 10 firms said that was our number one issue. Obviously, it's receded a bit in the past few months, but as you get in towards winter, there is concern about the impact, and that is an issue that is outside our control." "Clearly, what we need is a level playing field," Hawes summarised. Hawes also cited impending changes to the UK's trading mechanisms as a significant potential issue facing the sector. "Brexit isn't done," he reminded reporters. "We still have a range of regulatory uncertainty, but also the trading uncertainty - and probably the most important issue is the rules of origin, which have the potential to levy a 10% tariff, not on petrol cars, nor on diesel cars or vans, but only on pure-electric vehicles, which would be doing exactly what you don't want when trying to transition the market." The SMMT is in talks with its European equivalent, the ACEA, on the subject of pushing the roll-out of these new rules back to 2027, but, said Hawes, the European Commission remains "unpersuaded".